FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended August 31, 1999
---------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------- -----------
COMMISSION FILE NUMBER 0-7570
DELAWARE CANANDAIGUA BRANDS, INC. 16-0716709
AND ITS SUBSIDIARIES:
NEW YORK BATAVIA WINE CELLARS, INC. 16-1222994
NEW YORK CANANDAIGUA WINE COMPANY, INC. 16-1462887
NEW YORK CANANDAIGUA EUROPE LIMITED 16-1195581
ENGLAND AND WALES CANANDAIGUA LIMITED -----
NEW YORK POLYPHENOLICS, INC. 16-1546354
NEW YORK ROBERTS TRADING CORP. 16-0865491
DELAWARE BARTON INCORPORATED 36-3500366
DELAWARE BARTON BRANDS, LTD. 36-3185921
MARYLAND BARTON BEERS, LTD. 36-2855879
CONNECTICUT BARTON BRANDS OF CALIFORNIA, INC. 06-1048198
GEORGIA BARTON BRANDS OF GEORGIA, INC. 58-1215938
NEW YORK BARTON DISTILLERS IMPORT CORP. 13-1794441
DELAWARE BARTON FINANCIAL CORPORATION 51-0311795
WISCONSIN STEVENS POINT BEVERAGE CO. 39-0638900
ILLINOIS MONARCH IMPORT COMPANY 36-3539106
GEORGIA THE VIKING DISTILLERY, INC. 58-2183528
(State or other (Exact name of registrant as (I.R.S. Employer
jurisdiction of specified in its charter) Identification No.)
incorporation or
organization)
300 WILLOWBROOK OFFICE PARK, FAIRPORT, NEW YORK 14450
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(716) 218-2169
----------------------------------------------------
(Registrants' telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding with respect to each of the classes of common
stock of Canandaigua Brands, Inc., as of September 30, 1999, is set forth below
(all of the Registrants, other than Canandaigua Brands, Inc., are direct or
indirect wholly-owned subsidiaries of Canandaigua Brands, Inc.):
CLASS NUMBER OF SHARES OUTSTANDING
------ ----------------------------
Class A Common Stock, Par Value $.01 Per Share 14,896,803
Class B Common Stock, Par Value $.01 Per Share 3,158,345
<PAGE>
- 1 -
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ------- --------------------
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
August 31, February 28,
1999 1999
----------- ------------
(unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash investments $ 4,340 $ 27,645
Accounts receivable, net 344,652 260,433
Inventories, net 602,257 508,571
Prepaid expenses and other current assets 74,206 59,090
----------- -----------
Total current assets 1,025,455 855,739
PROPERTY, PLANT AND EQUIPMENT, net 553,442 428,803
OTHER ASSETS 801,391 509,234
----------- -----------
Total assets $ 2,380,288 $ 1,793,776
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 75,077 $ 87,728
Current maturities of long-term debt 17,844 6,005
Accounts payable 150,354 122,746
Accrued excise taxes 41,469 49,342
Other accrued expenses and liabilities 214,287 149,451
----------- -----------
Total current liabilities 499,031 415,272
----------- -----------
LONG-TERM DEBT, less current maturities 1,274,295 831,689
----------- -----------
DEFERRED INCOME TAXES 110,261 88,179
----------- -----------
OTHER LIABILITIES 27,752 23,364
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value-
Authorized, 1,000,000 shares;
Issued, none at August 31, 1999, and
February 28, 1999 - -
Class A Common Stock, $.01 par value-
Authorized, 120,000,000 shares;
Issued, 18,036,328 shares at August 31, 1999,
and 17,915,359 shares at February 28, 1999 180 179
Class B Convertible Common Stock, $.01 par value-
Authorized, 20,000,000 shares;
Issued, 3,796,524 shares at August 31, 1999,
and 3,849,173 shares at February 28, 1999 38 39
Additional paid-in capital 242,324 239,912
Retained earnings 313,028 281,081
Accumulated other comprehensive income-
Cumulative translation adjustment (4,907) (4,173)
----------- -----------
550,663 517,038
----------- -----------
Less-Treasury stock-
Class A Common Stock, 3,156,004 shares at
August 31, 1999, and 3,168,306 shares at (79,507) (79,559)
February 28, 1999, at cost
Class B Convertible Common Stock, 625,725 shares at
August 31, 1999, and February 28, 1999, at cost (2,207) (2,207)
----------- -----------
(81,714) (81,766)
----------- -----------
Total stockholders' equity 468,949 435,272
----------- -----------
Total liabilities and stockholders' equity $ 2,380,288 $ 1,793,776
=========== ===========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
<PAGE>
- 2 -
<TABLE>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<CAPTION>
For the Six Months Ended August 31, For the Three Months Ended August 31,
----------------------------------- -------------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
GROSS SALES $ 1,519,834 $ 880,150 $ 814,845 $ 457,281
Less - Excise taxes (368,085) (217,836) (193,265) (107,895)
------------ ------------ ------------ ------------
Net sales 1,151,749 662,314 621,580 349,386
COST OF PRODUCT SOLD (806,499) (467,017) (432,452) (246,150)
------------ ------------ ------------ ------------
Gross profit 345,250 195,297 189,128 103,236
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (235,821) (128,786) (125,320) (67,454)
NONRECURRING CHARGES (5,510) - - -
------------ ------------ ------------ ------------
Operating income 103,919 66,511 63,808 35,782
INTEREST EXPENSE, net (50,675) (15,952) (28,640) (7,425)
------------ ------------ ------------ ------------
Income before income taxes 53,244 50,559 35,168 28,357
PROVISION FOR INCOME TAXES (21,297) (20,729) (14,067) (11,626)
------------ ------------ ------------ ------------
NET INCOME $ 31,947 $ 29,830 $ 21,101 $ 16,731
============ ============ ============ ============
SHARE DATA:
Earnings per common share:
Basic $ 1.78 $ 1.60 $ 1.17 $ 0.90
============ ============ ============ =============
Diluted $ 1.73 $ 1.56 $ 1.14 $ 0.88
============ ============ ============ =============
Weighted average common shares outstanding:
Basic 17,994 18,669 18,010 18,589
Diluted 18,459 19,168 18,499 19,051
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
- 3 -
<TABLE>
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
For the Six Months Ended August 31,
-----------------------------------
1999 1998
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,947 $ 29,830
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property, plant and equipment 23,733 11,952
Amortization of intangible assets 10,410 5,015
Stock-based compensation expense 769 51
Amortization of discount on long-term debt 208 189
Deferred tax (benefit) provision (1,697) 900
Gain on sale of assets (1,486) (3)
Change in operating assets and liabilities,
net of effects from purchases of businesses:
Accounts receivable, net (64,766) (11,935)
Inventories, net 20,585 47,306
Prepaid expenses and other current assets (12,559) (10,867)
Accounts payable 9,383 11,339
Accrued excise taxes (8,076) 4,063
Other accrued expenses and liabilities 48,417 3,213
Other assets and liabilities, net 2,230 (2,549)
----------- -----------
Total adjustments 27,151 58,674
----------- -----------
Net cash provided by operating activities 59,098 88,504
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses, net of cash acquired (452,491) -
Purchases of property, plant and equipment (30,759) (14,098)
Proceeds from sale of assets 1,071 27
Purchase of joint venture minority interest - (716)
----------- -----------
Net cash used in investing activities (482,179) (14,787)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 664,080 -
Exercise of employee stock options 1,194 2,154
Proceeds from employee stock purchases 601 1,284
Principal payments of long-term debt (242,529) (12,000)
Net repayments of notes payable (12,676) (28,900)
Payment of issuance costs of long-term debt (10,751) -
Purchases of treasury stock - (36,014)
----------- -----------
Net cash provided by (used in) financing
activities 399,919 (73,476)
----------- -----------
Effect of exchange rate changes on cash and
cash investments (143) -
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH INVESTMENTS (23,305) 241
CASH AND CASH INVESTMENTS, beginning of period 27,645 1,232
----------- -----------
CASH AND CASH INVESTMENTS, end of period $ 4,340 $ 1,473
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fair value of assets acquired, including
cash acquired $ 554,235 $ -
Liabilities assumed (99,255) -
----------- -----------
Cash paid 454,980 -
Less - cash acquired (2,489) -
----------- -----------
Net cash paid for purchases of businesses $ 452,491 $ -
=========== ===========
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
- 4 -
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1999
1) MANAGEMENT'S REPRESENTATIONS:
The condensed consolidated financial statements included herein have been
prepared by Canandaigua Brands, Inc. and its subsidiaries (the "Company"),
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission applicable to quarterly reporting on Form 10-Q and reflect,
in the opinion of the Company, all adjustments necessary to present fairly the
financial information for the Company. All such adjustments are of a normal
recurring nature. Certain information and footnote disclosures normally included
in financial statements, prepared in accordance with generally accepted
accounting principles, have been condensed or omitted as permitted by such rules
and regulations. These consolidated financial statements and related notes
should be read in conjunction with the consolidated financial statements and
related notes included in the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1999.
2) ACQUISITIONS:
On April 9, 1999, in an asset acquisition, the Company acquired several
well-known Canadian whisky brands, including Black Velvet, production facilities
located in Alberta and Quebec, Canada, case goods and bulk whisky inventories
and other related assets from affiliates of Diageo plc (the "Black Velvet
Acquisition"). In connection with the transaction, the Company also entered into
multi-year agreements with Diageo to provide packaging and distilling services
for various brands retained by Diageo. The purchase price was approximately
$185.5 million and was financed by the proceeds from the sale of the "Senior
Subordinated Notes" (as defined in Note 6).
The Black Velvet Acquisition was accounted for using the purchase method;
accordingly, the acquired assets were recorded at fair market value at the date
of acquisition. The excess of the purchase price over the estimated fair market
value of the net assets acquired (goodwill), $30.1 million, is being amortized
on a straight-line basis over 40 years. The results of operations of the Black
Velvet Acquisition have been included in the Consolidated Statements of Income
since the date of acquisition.
On June 4, 1999, the Company purchased all of the outstanding capital stock
of Franciscan Vineyards, Inc. and related transactions purchased vineyards, a
winery, equipment and other vineyard related assets located in Northern
California (collectively, the "Franciscan Acquisition"). The purchase price was
approximately $212.0 million cash plus assumed debt, net of cash acquired, of
approximately $30.8 million. The purchase price was financed by additional term
loan borrowings under the bank credit agreement. Also, on June 4, 1999, the
Company acquired all of the outstanding capital stock of Simi Winery, Inc. (the
"Simi Acquisition"). The cash purchase price was approximately $57.5 million and
was financed by revolving loan borrowings under the bank credit agreement. The
purchases were accounted for using the purchase method; accordingly, the
acquired assets were recorded at fair market value at the date of acquisition.
The excess of the purchase price over the estimated fair market value of the net
assets acquired (goodwill) for the Franciscan Acquisition and the Simi
Acquisition, $72.0 million and $6.9 million, respectively, is being amortized on
a straight-line basis over 40 years. The Franciscan and Simi operations are
managed together as a separate business segment of the Company ("Franciscan").
The results of operations of Franciscan have been included in the Consolidated
Statements of Income since the date of acquisition. The unaudited pro forma
results of operations for the six months ended August 31, 1999 (shown in the
table below), reflect total nonrecurring charges of $12.4 million ($0.40 per
share on a diluted basis) related to transaction costs, primarily for exercise
of stock options, which were incurred by Franciscan Vineyards, Inc. prior to the
acquisition.
<PAGE>
- 5 -
The following table sets forth the unaudited pro forma results of
operations of the Company for the six months ended August 31, 1999 and 1998,
which gives effect to the acquisition of Matthew Clark plc ("Matthew Clark"),
the Black Velvet Acquisition and Franciscan as if they occurred on March 1,
1998. The unaudited pro forma results of operations are presented after giving
effect to certain adjustments for depreciation, amortization of goodwill,
interest expense on the acquisition financing and related income tax effects.
The unaudited pro forma results of operations are based upon currently available
information and upon certain assumptions that the Company believes are
reasonable under the circumstances. The unaudited pro forma results of
operations do not purport to present what the Company's results of operations
would actually have been if the aforementioned transactions had in fact occurred
on such date or at the beginning of the period indicated, nor do they project
the Company's financial position or results of operations at any future date or
for any future period.
For the Six Months Ended August 31,
-----------------------------------
1999 1998
--------------- ---------------
(in thousands, except per share data)
Net sales $ 1,179,113 $ 1,062,563
Income before income taxes $ 37,711 $ 55,300
Net income $ 22,627 $ 32,626
Earnings per common share:
Basic $ 1.26 $ 1.75
=============== ===============
Diluted $ 1.23 $ 1.70
=============== ===============
Weighted average common shares outstanding:
Basic 17,994 18,669
Diluted 18,459 19,168
3) INVENTORIES:
Inventories are stated at the lower of cost (computed in accordance with
the first-in, first-out method) or market. Elements of cost include materials,
labor and overhead and consist of the following:
August 31, February 28,
1999 1999
--------------- ---------------
(in thousands)
Raw materials and supplies $ 37,523 $ 32,388
Wine and distilled spirits in process 362,514 344,175
Finished case goods 202,220 132,008
--------------- ---------------
$ 602,257 $ 508,571
=============== ===============
<PAGE>
- 6 -
4) OTHER ASSETS:
The major components of other assets are as follows:
August 31, February 28,
1999 1999
--------------- ---------------
(in thousands)
Goodwill $ 421,079 $ 311,908
Trademarks 270,243 102,183
Distribution rights and
agency license agreements 87,052 76,894
Other 68,274 53,779
--------------- ---------------
846,648 544,764
Less - Accumulated amortization (45,257) (35,530)
--------------- ---------------
$ 801,391 $ 509,234
=============== ===============
5) OTHER ACCRUED EXPENSES AND LIABILITIES:
The major components of other accrued expenses and liabilities are as
follows:
August 31, February 28,
1999 1999
--------------- ---------------
(in thousands)
Accrued advertising and promotions $ 53,830 $ 38,604
Accrued income taxes payable 28,765 9,347
Accrued interest 12,814 11,384
Accrued salaries and commissions 10,980 15,584
Other 107,898 74,532
--------------- --------------
$ 214,287 $ 149,451
=============== ==============
6) BORROWINGS:
On March 4, 1999, the Company issued $200.0 million aggregate principal
amount of 8 1/2% Senior Subordinated Notes due March 2009 ("Senior Subordinated
Notes"). The net proceeds of the offering (approximately $195.0 million) were
used to fund the Black Velvet Acquisition and to pay the fees and expenses
related thereto with the remainder of the net proceeds used for general
corporate purposes. Interest on the Senior Subordinated Notes is payable
semiannually on March 1 and September 1 of each year, beginning September 1,
1999. The Senior Subordinated Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after March 1, 2004. The Company may also
redeem up to $70.0 million of the Senior Subordinated Notes using the proceeds
of certain equity offerings completed before March 1, 2002. The Senior
Subordinated Notes are unsecured and subordinated to the prior payment in full
of all senior indebtedness of the Company, which includes the bank credit
agreement. The Senior Subordinated Notes are guaranteed, on a senior
subordinated basis, by certain of the Company's significant operating
subsidiaries.
On August 4, 1999, the Company issued $200.0 million aggregate principal
amount of 8 5/8% Senior Notes due August 2006 ("Senior Notes"). The net proceeds
of the offering (approximately $196.0 million) was used to repay a portion of
the Company's borrowings under its bank credit agreement. Interest on the Senior
Notes is payable semiannually on February 1 and August 1 of each year, beginning
<PAGE>
- 7 -
February 1, 2000. The Senior Notes are redeemable at the option of the Company,
in whole or in part, at any time. The Senior Notes are unsecured senior
obligations and rank equally in right of payment to all existing and future
unsecured senior indebtedness of the Company. The Senior Notes are guaranteed,
on a senior basis, by certain of the Company's significant operating
subsidiaries.
7) EARNINGS PER COMMON SHARE:
Basic earnings per common share exclude the effect of common stock
equivalents and are computed by dividing income available to common stockholders
by the weighted average number of common shares outstanding during the period
for Class A Common Stock and Class B Convertible Common Stock. Diluted earnings
per common share reflect the potential dilution that could result if securities
or other contracts to issue common stock were exercised or converted into common
stock. Diluted earnings per common share assume the exercise of stock options
using the treasury stock method and assume the conversion of convertible
securities, if any, using the "if converted" method.
The computation of basic and diluted earnings per common share is as
follows:
<TABLE>
<CAPTION>
For the Six Months For the Three Months
Ended August 31, Ended August 31,
------------------------ -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Income applicable to common shares $ 31,947 $ 29,830 $ 21,101 $ 16,731
========== ========== ========== ==========
Weighted average common shares
outstanding - basic 17,994 18,669 18,010 18,589
Stock options 465 499 489 462
----------- ---------- ---------- ----------
Weighted average common shares
outstanding - diluted 18,459 19,168 18,499 19,051
=========== ========== ========== ==========
EARNINGS PER COMMON SHARE - BASIC $ 1.78 $ 1.60 $ 1.17 $ 0.90
=========== ========== ========== ==========
EARNINGS PER COMMON SHARE - DILUTED $ 1.73 $ 1.56 $ 1.14 $ 0.88
=========== ========== ========== ==========
</TABLE>
8) STOCK INCENTIVE PLANS:
At the Company's Annual Meeting of Stockholders held on July 20, 1999,
stockholders approved the amendment to the Company's Long-Term Stock Incentive
Plan to increase the aggregate number of shares of the Class A Stock available
for awards under the plan from 4,000,000 shares to 7,000,000 shares.
9) SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:
The following table presents summarized financial information for the
Company, the parent company, the combined subsidiaries of the Company which
guarantee the Company's senior subordinated notes and senior notes ("Subsidiary
Guarantors") and the combined subsidiaries of the Company which are not
Subsidiary Guarantors, primarily Matthew Clark ("Subsidiary Nonguarantors"). The
Subsidiary Guarantors are wholly owned and the guarantees are full,
unconditional, joint and several obligations of each of the Subsidiary
Guarantors. Separate financial statements for the Subsidiary Guarantors of the
Company are not presented because the Company has determined that such financial
statements would not be material to investors. The Subsidiary Guarantors
comprise all of the direct and indirect subsidiaries of the Company, other than
Matthew Clark, the Company's Canadian subsidiary, and certain other subsidiaries
which individually, and in the aggregate, are inconsequential. There are no
restrictions on the ability of the Subsidiary Guarantors to transfer funds to
the Company in the form of cash dividends, loans or advances.
<PAGE>
- 8 -
<TABLE>
<CAPTION>
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(in thousands)
Balance Sheet Data:
August 31, 1999
- ---------------
Current assets $ 109,222 $ 610,468 $ 305,765 $ - $ 1,025,455
Noncurrent assets $ 922,563 $ 1,254,587 $ 458,473 $ (1,280,790) $ 1,354,833
Current liabilities $ 181,854 $ 29,961 $ 287,216 $ - $ 499,031
Noncurrent liabilities $ 1,267,132 $ 95,768 $ 49,408 $ - $ 1,412,308
February 28, 1999
- -----------------
Current assets $ 114,243 $ 532,028 $ 209,468 $ - $ 855,739
Noncurrent assets $ 646,133 $ 396,125 $ 421,867 $ (526,088) $ 938,037
Current liabilities $ 157,648 $ 126,803 $ 130,821 $ - $ 415,272
Noncurrent liabilities $ 815,421 $ 73,178 $ 54,633 $ - $ 943,232
Income Statement Data:
For the Six Months
- ------------------
Ended August 31, 1999
- ---------------------
Net sales $ 276,053 $ 694,858 $ 356,468 $ (175,630) $ 1,151,749
Gross profit $ 89,328 $ 153,379 $ 102,543 $ - $ 345,250
Income before
income taxes $ 6,592 $ 26,624 $ 20,028 $ - $ 53,244
Net income $ 3,955 $ 15,974 $ 12,018 $ - $ 31,947
For the Six Months
- ------------------
Ended August 31, 1998
- ---------------------
Net sales $ 248,590 $ 552,352 $ 1,093 $ (139,721) $ 662,314
Gross profit $ 71,268 $ 123,635 $ 394 $ - $ 195,297
(Loss) income before
income taxes $ (511) $ 51,359 $ (289) $ - $ 50,559
Net (loss) income $ (302) $ 30,302 $ (170) $ - $ 29,830
For the Three Months
- --------------------
Ended August 31, 1999
- ---------------------
Net sales $ 121,430 $ 395,639 $ 188,258 $ (83,747) $ 621,580
Gross profit $ 49,898 $ 83,504 $ 55,726 $ - $ 189,128
Income before
income taxes $ 11,616 $ 11,086 $ 12,466 $ - $ 35,168
Net income $ 6,969 $ 6,652 $ 7,480 $ - $ 21,101
<PAGE>
- 9 -
<CAPTION>
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(in thousands)
For the Three Months
- --------------------
Ended August 31, 1998
- ---------------------
Net sales $ 137,438 $ 289,774 $ 271 $ (78,097) $ 349,386
Gross profit $ 36,878 $ 66,298 $ 60 $ - $ 103,236
(Loss) income before
income taxes $ (404) $ 29,177 $ (416) $ - $ 28,357
Net (loss) income $ (238) $ 17,266 $ (297) $ - $ 16,731
</TABLE>
10) BUSINESS SEGMENT INFORMATION:
The Company reports its operating results in five segments: Canandaigua
Wine (branded popularly-priced wine and brandy, and other, primarily grape juice
concentrate); Barton (primarily beer and spirits); Matthew Clark (branded wine,
cider and bottled water, and wholesale wine, cider, spirits, beer and soft
drinks); Franciscan (primarily branded super-premium and ultra-premium wine) and
Corporate Operations and Other (primarily corporate related items). Segment
selection was based upon internal organizational structure, the way in which
these operations are managed and their performance evaluated by management and
the Company's Board of Directors, the availability of separate financial
results, and materiality considerations. The accounting policies of the segments
are the same as those described in the summary of significant accounting
policies. The Company evaluates performance based on operating profits of the
respective business units.
Segment information is as follows:
<TABLE>
<CAPTION>
For the Six Months For the Three Months
Ended August 31, Ended August 31,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(in thousands)
Canandaigua Wine:
- -----------------
Net sales:
Branded:
External customers $ 292,182 $ 267,343 $ 149,540 $ 140,545
Intersegment 2,989 - 1,239 -
----------- ----------- ----------- -----------
Total Branded 295,171 267,343 150,779 140,545
----------- ----------- ----------- -----------
Other:
External customers 38,579 39,350 19,449 20,211
Intersegment 37 - - -
----------- ----------- ----------- -----------
Total Other 38,616 39,350 19,449 20,211
----------- ----------- ----------- -----------
Net sales $ 333,787 $ 306,693 $ 170,228 $ 160,756
Operating profit $ 16,019 $ 17,661 $ 10,412 $ 10,221
Long-lived assets $ 194,114 $ 187,329 $ 194,114 $ 187,329
Total assets $ 597,832 $ 562,397 $ 597,832 $ 562,397
Capital expenditures $ 12,708 $ 11,418 $ 7,070 $ 6,582
Depreciation and amortization $ 11,649 $ 10,716 $ 6,113 $ 5,125
<PAGE>
- 10 -
<CAPTION>
For the Six Months For the Three Months
Ended August 31, Ended August 31,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(in thousands)
Barton:
- -------
Net sales:
Beer $ 323,806 $ 259,929 $ 177,195 $ 141,133
Spirits 127,149 94,599 73,010 47,227
----------- ----------- ----------- -----------
Net sales $ 450,955 $ 354,528 $ 250,205 $ 188,360
Operating profit $ 73,459 $ 54,620 $ 41,962 $ 28,832
Long-lived assets $ 76,849 $ 51,008 $ 76,849 $ 51,008
Total assets $ 714,677 $ 484,607 $ 714,677 $ 484,607
Capital expenditures $ 2,668 $ 1,688 $ 1,752 $ 928
Depreciation and amortization $ 6,398 $ 5,392 $ 3,237 $ 2,700
Matthew Clark:
- --------------
Net sales:
Branded $ 155,254 $ - $ 80,879 $ -
Wholesale 194,753 - 102,331 -
----------- ----------- ----------- -----------
Net sales $ 350,007 $ - $ 183,210 $ -
Operating profit $ 19,310 $ - $ 11,980 $ -
Long-lived assets $ 170,703 $ - $ 170,703 $ -
Total assets $ 678,498 $ - $ 678,498 $ -
Capital expenditures $ 11,115 $ - $ 6,459 $ -
Depreciation and amortization $ 12,816 $ - $ 8,390 $ -
Franciscan:
- -----------
Net sales $ 17,137 $ - $ 17,137 $ -
Operating profit $ 1,571 $ - $ 1,571 $ -
Long-lived assets $ 94,716 $ - $ 94,716 $ -
Total assets $ 352,790 $ - $ 352,790 $ -
Capital expenditures $ 3,720 $ - $ 3,720 $ -
Depreciation and amortization $ 1,809 $ - $ 1,809 $ -
Corporate Operations and Other:
- -------------------------------
Net sales $ 2,889 $ 1,093 $ 2,004 $ 270
Operating loss $ (6,440) $ (5,770) $ (2,117) $ (3,271)
Long-lived assets $ 17,060 $ 7,820 $ 17,060 $ 7,820
Total assets $ 36,491 $ 18,847 $ 36,491 $ 18,847
Capital expenditures $ 548 $ 992 $ 437 $ 960
Depreciation and amortization $ 1,471 $ 859 $ 831 $ 634
<PAGE>
- 11 -
<CAPTION>
For the Six Months For the Three Months
Ended August 31, Ended August 31,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(in thousands)
Intersegment eliminations:
- --------------------------
Net sales $ (3,026) $ - $ (1,204) $ -
Consolidated:
- -------------
Net sales $ 1,151,749 $ 662,314 $ 621,580 $ 349,386
Operating profit $ 103,919 $ 66,511 $ 63,808 $ 35,782
Long-lived assets $ 553,442 $ 246,157 $ 553,442 $ 246,157
Total assets $ 2,380,288 $ 1,065,851 $ 2,380,288 $ 1,065,851
Capital expenditures $ 30,759 $ 14,098 $ 19,438 $ 8,470
Depreciation and amortization $ 34,143 $ 16,967 $ 20,380 $ 8,459
</TABLE>
11) COMPREHENSIVE INCOME:
Comprehensive income consists of net income and foreign currency
translation adjustments for the six month and three month periods ended August
31, 1999. For the six month and three month periods ended August 31, 1998,
comprehensive income consisted of net income, exclusively. The reconciliation of
net income to comprehensive net income is as follows:
<TABLE>
<CAPTION>
For the Six Months For the Three Months
Ended August 31, Ended August 31,
--------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
(in thousands)
Net income $ 31,947 $ 29,830 $ 21,101 $ 16,731
Other comprehensive income:
Cumulative translation adjustment ( 734) - ( 1,584) -
------------ ------------ ------------ ------------
Total comprehensive income $ 31,213 $ 29,830 $ 19,517 $ 16,731
============ ============ ============ ============
</TABLE>
12) ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 requires that every
derivative be recorded as either an asset or liability in the balance sheet and
measured at its fair value. SFAS No. 133 also requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 ("SFAS No. 137"), "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133." SFAS No. 137 delays the
<PAGE>
- 12 -
effective date of SFAS No. 133 for one year. With the issuance of SFAS No. 137,
the Company is required to adopt SFAS No. 133 on a prospective basis for interim
periods and fiscal years beginning March 1, 2001. The Company believes the
effect of the adoption on its financial statements will not be material based on
the Company's current risk management strategies.
13) SUBSEQUENT EVENT:
2000 CREDIT AGREEMENT -
On October 6, 1999, the Company, certain of its principal operating
subsidiaries and a syndicate of banks (the "Syndicate Banks"), for which The
Chase Manhattan Bank acts as administrative agent, entered into a new senior
credit agreement (the "2000 Credit Agreement"). The 2000 Credit Agreement
includes both U.S. dollar and British pound sterling commitments of the
Syndicate Banks of up to, in the aggregate, the equivalent of $1.0 billion
(subject to increase as therein provided to $1.2 billion). Proceeds of the 2000
Credit Agreement were used to repay all outstanding principal and accrued
interest on all loans under the Company's prior bank credit agreement, and are
available to fund permitted acquisitions and ongoing working capital needs of
the Company and its subsidiaries.
The 2000 Credit Agreement provides for a $380.0 million Tranche I Term Loan
facility due in December 2004, a $320.0 million Tranche II Term Loan facility
available for borrowing in British pound sterling due in December 2004, and a
$300.0 million Revolving Credit facility (including letters of credit up to a
maximum of $20.0 million) which expires in December 2004. The Tranche I Term
Loan facility requires quarterly repayments, starting at $12.0 million in March
2000 and increasing thereafter annually with final payments of $23.0 million in
each quarter in 2004. The Tranche II Term Loan facility requires quarterly
repayments of $1.6 million for each quarter in 2000, $3.2 million for each
quarter in 2001 and 2002, $4.0 million for each quarter in 2003 and $68.0
million in each quarter in 2004 (all such repayments shall be in British pound
sterling and the foregoing amounts reflect the U.S. dollar equivalents at
closing on October 6, 1999). There are certain mandatory term loan prepayments,
including those based on sale of assets and issuance of debt and equity, in each
case subject to baskets, exceptions and thresholds which are generally more
favorable to the Company than those contained in its prior bank credit
agreement.
The rate of interest payable, at the Company's option, is a function of the
London interbank offering rate (LIBOR) plus a margin, federal funds rate plus a
margin, or the prime rate plus a margin. The margin is adjustable based upon the
Company's Debt Ratio (as defined in the 2000 Credit Agreement) and, with respect
to LIBOR borrowings, ranges between 0.75% and 1.25% for Revolving Credit loans
and 1.00% and 1.75% for Term Loans. The initial margin for all loans was set at
the highest level at closing and is subject to reduction after November 30,
1999, depending on the Company's Debt Ratio. In addition to interest, the
Company pays a facility fee on the Revolving Credit commitments, initially at
0.50% per annum and subject to reduction after November 30, 1999, to 0.25%,
depending on the Company's Debt Ratio.
Certain of the Company's principal operating subsidiaries have guaranteed
the Company's obligations under the 2000 Credit Agreement. In addition, subject
to certain limitations applicable to inactive subsidiaries and to some of the
Company's foreign subsidiaries, all of the capital stock of each operating
wholly-owned subsidiary (other than the subsidiaries of Matthew Clark) has been
pledged to the Syndicate Banks as security for the obligations under the 2000
Credit Agreement.
The Company and its subsidiaries are subject to customary secured lending
covenants including those restricting additional liens, incurring additional
indebtedness, the sale of assets, the payment of dividends, transactions with
affiliates and the making of certain investments, in each case subject to
<PAGE>
- 13 -
baskets, exceptions and thresholds which are generally more favorable to the
Company than those contained in its prior bank credit agreement. The primary
financial covenants require the maintenance of a debt coverage ratio, a senior
debt coverage ratio, a fixed charges ratio and an interest coverage ratio. Among
the most restrictive covenants contained in the 2000 Credit Agreement is the
requirement to maintain a fixed charges ratio of not less than 1.0 at the last
day of each fiscal quarter for the most recent four quarters.
<PAGE>
- 14 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
INTRODUCTION
- ------------
The following discussion and analysis summarizes the significant factors
affecting (i) consolidated results of operations of the Company for the three
months ended August 31, 1999 ("Second Quarter 2000"), compared to the three
months ended August 31, 1998 ("Second Quarter 1999"), and for the six months
ended August 31, 1999 ("Six Months 2000"), compared to the six months ended
August 31, 1998 ("Six Months 1999"), and (ii) financial liquidity and capital
resources for Six Months 2000. This discussion and analysis should be read in
conjunction with the Company's consolidated financial statements and notes
thereto included herein and in the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1999.
The Company operates primarily in the beverage alcohol industry in the
United States and the United Kingdom. The Company reports its operating results
in five segments: Canandaigua Wine (branded popularly-priced wine and brandy,
and other, primarily grape juice concentrate); Barton (primarily beer and
spirits); Matthew Clark (branded wine, cider and bottled water, and wholesale
wine, cider, spirits, beer and soft drinks); Franciscan (primarily branded
super-premium and ultra-premium wine); and Corporate Operations and Other
(primarily corporate related items).
RECENT ACQUISITIONS
On December 1, 1998, the Company acquired control of Matthew Clark plc
("Matthew Clark") and has since acquired all of Matthew Clark's outstanding
shares (the "Matthew Clark Acquisition"). Prior to the Matthew Clark
Acquisition, the Company was principally a producer and supplier of wine and an
importer and producer of beer and distilled spirits in the United States. The
Matthew Clark Acquisition established the Company as a leading British producer
of cider, wine and bottled water and as a leading beverage alcohol wholesaler in
the United Kingdom. The results of operations of Matthew Clark have been
included in the consolidated results of operations of the Company since the date
of acquisition, December 1, 1998.
On April 9, 1999, in an asset acquisition, the Company acquired several
well-known Canadian whisky brands, including Black Velvet, production facilities
located in Alberta and Quebec, Canada, case goods and bulk whisky inventories
and other related assets from affiliates of Diageo plc (collectively, the "Black
Velvet Acquisition"). In connection with the transaction, the Company also
entered into multi-year agreements with Diageo to provide packaging and
distilling services for various brands retained by Diageo. The results of
operations from the Black Velvet Acquisition are reported in the Barton segment
and have been included in the consolidated results of operations of the Company
since the date of acquisition.
On June 4, 1999, the Company purchased all of the outstanding capital stock
of Franciscan Vineyards, Inc. and in related transactions purchased vineyards, a
winery, equipment and other vineyard related assets located in Northern
California (collectively, the "Franciscan Acquisition"). Also on June 4, 1999,
the Company purchased all of the outstanding capital stock of Simi Winery, Inc.
("Simi"). (The acquisition of the capital stock of Simi is hereafter referred to
as the "Simi Acquisition".) The Simi Acquisition includes the Simi winery,
equipment, vineyards and inventory. The results of operations from the
Franciscan and Simi Acquisitions (collectively, "Franciscan") are reported
together in the Franciscan segment and have been included in the consolidated
results of operations of the Company since the date of acquisition.
<PAGE>
- 15 -
The Matthew Clark, Black Velvet and Franciscan Acquisitions are significant
and the Company expects them to have a material impact on the Company's future
results of operations.
RESULTS OF OPERATIONS
- ---------------------
SECOND QUARTER 2000 COMPARED TO SECOND QUARTER 1999
NET SALES
The following table sets forth the net sales (in thousands of dollars) by
operating segment of the Company for Second Quarter 2000 and Second Quarter
1999.
Second Quarter 2000 Compared to Second Quarter 1999
---------------------------------------------------
Net Sales
---------------------------------------------------
%Increase/
2000 1999 (Decrease)
--------- --------- ----------
Canandaigua Wine:
Branded:
External customers $ 149,540 $ 140,545 6.4 %
Intersegment 1,239 -- N/A
--------- ---------
Total Branded 150,779 140,545 7.3 %
--------- ---------
Other:
External customers 19,449 20,211 (3.8)%
Intersegment -- -- N/A
--------- ---------
Total Other 19,449 20,211 (3.8)%
--------- ---------
Canandaigua Wine net sales $ 170,228 $ 160,756 5.9 %
--------- ---------
Barton:
Beer $ 177,195 $ 141,133 25.6 %
Spirits 73,010 47,227 54.6 %
--------- ---------
Barton net sales $ 250,205 $ 188,360 32.8 %
--------- ---------
Matthew Clark:
Branded $ 80,879 $ -- N/A
Wholesale 102,331 -- N/A
--------- ---------
Matthew Clark net sales $ 183,210 $ -- N/A
--------- ---------
Franciscan $ 17,137 $ -- N/A
--------- ---------
Corporate Operations and Other $ 2,004 $ 270 642.2 %
--------- ---------
Intersegment eliminations $ (1,204) $ -- N/A
--------- ---------
Consolidated Net Sales $ 621,580 $ 349,386 77.9 %
========= =========
Net sales for Second Quarter 2000 increased to $621.6 million from $349.4
million for Second Quarter 1999, an increase of $272.2 million, or 77.9%.
CANANDAIGUA WINE
Net sales for Canandaigua Wine for Second Quarter 2000 increased to $170.2
million from $160.8 million for Second Quarter 1999, an increase of $9.5
million, or 5.9%. This increase resulted primarily from (i) an increase in sales
of Arbor Mist and Almaden box wine, (ii) an increase in the
<PAGE>
- 16 -
Company's bulk wine sales and (iii) growth in the Company's international
business. These increases were partially offset by declines in certain other
brands and in the Company's grape juice concentrate business.
BARTON
Net sales for Barton for Second Quarter 2000 increased to $250.2 million
from $188.4 million for Second Quarter 1999, an increase of $61.8 million, or
32.8%. This increase resulted primarily from an increase in sales of imported
beer brands led by Barton's Mexican portfolio as well as from $24.7 million of
sales of products and services acquired in the Black Velvet Acquisition, which
was completed in April 1999.
MATTHEW CLARK
Net sales for Matthew Clark for Second Quarter 2000 were $183.2 million.
FRANCISCAN
Net sales for Franciscan for Second Quarter 2000 since the date of
acquisition, June 4, 1999, were $17.1 million.
GROSS PROFIT
The Company's gross profit increased to $189.1 million for Second Quarter
2000 from $103.2 million for Second Quarter 1999, an increase of $85.9 million,
or 83.2%. The dollar increase in gross profit was primarily related to sales
from the Matthew Clark, Black Velvet, Franciscan and Simi Acquisitions, all
completed after Second Quarter 1999, as well as increased Barton beer sales. As
a percent of net sales, gross profit increased to 30.4% for Second Quarter 2000
from 29.5% in Second Quarter 1999, resulting primarily from sales of
higher-margin spirits and super-premium and ultra-premium wine acquired in the
Black Velvet and Franciscan and Simi Acquisitions, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $125.3 million
for Second Quarter 2000 from $67.5 million for Second Quarter 1999, an increase
of $57.9 million, or 85.8%. The dollar increase in selling, general and
administrative expenses resulted primarily from the addition of the Matthew
Clark and Franciscan businesses and expenses related to the brands acquired in
the Black Velvet Acquisition. The Company also increased its marketing and
promotional costs to generate additional sales volume, particularly of Barton
beer brands. Selling, general and administrative expenses as a percent of net
sales increased to 20.2% for First Quarter 2000 as compared to 19.3% for First
Quarter 1999. The increase in percent of net sales resulted primarily from the
Matthew Clark, Franciscan and Simi Acquisitions, as Matthew Clark and
Franciscan's selling, general and administrative expenses as a percent of net
sales is typically at the high end of the range of the Company's operating
segments' percentages.
<PAGE>
- 17 -
OPERATING INCOME
The following table sets forth the operating profit/(loss) (in thousands of
dollars) by operating segment of the Company for Second Quarter 2000 and Second
Quarter 1999.
Second Quarter 2000 Compared to Second Quarter 1999
---------------------------------------------------
Operating Profit/(Loss)
---------------------------------------------------
%Increase/
2000 1999 (Decrease)
-------- -------- ----------
Canandaigua Wine $ 10,412 $ 10,221 1.9 %
Barton 41,962 28,832 45.5 %
Matthew Clark 11,980 -- N/A
Franciscan 1,571 -- N/A
Corporate Operations and Other (2,117) (3,271) (35.3)%
-------- --------
Consolidated Operating Profit $ 63,808 $ 35,782 78.3 %
======== ========
As a result of the above factors, consolidated operating income increased
to $63.8 million for Second Quarter 2000 from $35.8 million for Second Quarter
1999, an increase of $28.0 million, or 78.3%.
INTEREST EXPENSE, NET
Net interest expense increased to $28.6 million for Second Quarter 2000
from $7.4 million for Second Quarter 1999, an increase of $21.2 million or
285.7%. The increase resulted primarily from additional interest expense
associated with the borrowings related to the Matthew Clark, Black Velvet,
Franciscan and Simi Acquisitions.
NET INCOME
As a result of the above factors, net income increased to $21.1 million for
Second Quarter 2000 from $16.7 million for Second Quarter 1999, an increase of
$4.4 million, or 26.1%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Second Quarter
2000 were $84.2 million, an increase of $39.9 million over EBITDA of $44.2
million for Second Quarter 1999. EBITDA should not be construed as an
alternative to operating income or net cash flow from operating activities and
should not be construed as an indication of operating performance or as a
measure of liquidity.
<PAGE>
- 18 -
SIX MONTHS 2000 COMPARED TO SIX MONTHS 1999
NET SALES
The following table sets forth the net sales (in thousands of dollars) by
operating segment of the Company for Six Months 2000 and Six Months 1999.
Six Months 2000 Compared to Six Months 1999
-------------------------------------------
Net Sales
-------------------------------------------
%Increase/
2000 1999 (Decrease)
----------- --------- ----------
Canandaigua Wine:
Branded:
External customers $ 292,182 $ 267,343 9.3 %
Intersegment 2,989 -- N/A
----------- ---------
Total Branded 295,171 267,343 10.4 %
----------- ---------
Other:
External customers 38,579 39,350 (2.0)%
Intersegment 37 -- N/A
----------- ---------
Total Other 38,616 39,350 (1.9)%
----------- ---------
Canandaigua Wine net sales $ 333,787 $ 306,693 8.8 %
----------- ---------
Barton:
Beer $ 323,806 $ 259,929 24.6 %
Spirits 127,149 94,599 34.4 %
----------- ---------
Barton net sales $ 450,955 $ 354,528 27.2 %
----------- ---------
Matthew Clark:
Branded $ 155,254 $ -- N/A
Wholesale 194,753 -- N/A
----------- ---------
Matthew Clark net sales $ 350,007 $ -- N/A
----------- ---------
Franciscan $ 17,137 $ -- N/A
----------- ---------
Corporate Operations and Other $ 2,889 $ 1,093 164.3 %
----------- ---------
Intersegment eliminations $ (3,026) $ -- N/A
----------- ---------
Consolidated Net Sales $ 1,151,749 $ 662,314 73.9 %
=========== =========
Net sales for Six Months 2000 increased to $1,151.7 million from $662.3
million for Six Months 1999, an increase of $489.4 million, or 73.9%.
CANANDAIGUA WINE
Net sales for Canandaigua Wine for Six Months 2000 increased to $333.8
million from $306.7 million for Six Months 1999, an increase of $27.1 million,
or 8.8%. This increase resulted primarily from (i) an increase in sales of Arbor
Mist, which was introduced in Second Quarter 1999, (ii) an increase in Almaden
box wine sales, (iii) an increase in the Company's bulk wine sales, and (iv)
growth in the Company's international business. These increases were partially
offset by declines in certain other brands and in the Company's grape juice
concentrate business.
<PAGE>
- 19 -
BARTON
Net sales for Barton for Six Months 2000 increased to $451.0 million from
$354.5 million for Six Months 1999, an increase of $96.4 million, or 27.2%. This
increase resulted primarily from an increase in sales of imported beer brands
led by Barton's Mexican portfolio as well as from $31.9 million of sales of
products and services acquired in the Black Velvet Acquisition, which was
completed in April 1999.
MATTHEW CLARK
Net sales for Matthew Clark for Six Months 2000 were $350.0 million.
FRANCISCAN
Net sales for Franciscan for Six Months 2000 since the date of acquisition,
June 4, 1999, were $17.1 million.
GROSS PROFIT
The Company's gross profit increased to $345.3 million for Six Months 2000
from $195.3 million for Six Months 1999, an increase of $150.0 million, or
76.8%. The dollar increase in gross profit was primarily related to sales from
the Matthew Clark, Black Velvet, Franciscan and Simi Acquisitions, all completed
after Six Months 1999, as well as increased Barton beer and Canandaigua Wine
wine sales. As a percent of net sales, gross profit increased to 30.0% for Six
Months 2000 from 29.5% for Six Months 1999, resulting primarily from sales of
higher-margin spirits and super-premium and ultra-premium wine acquired in the
Black Velvet and Franciscan and Simi Acquisitions, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $235.8 million
for Six Months 2000 from $128.8 million for Six Months 1999, an increase of
$107.0 million, or 83.1%. The dollar increase in selling, general and
administrative expenses resulted primarily from the addition of the Matthew
Clark and Franciscan businesses and expenses related to the brands acquired in
the Black Velvet Acquisition. The Company also increased its marketing and
promotional costs to generate additional sales volume, particularly of certain
Canandaigua Wine brands and Barton beer brands. Selling, general and
administrative expenses as a percent of net sales increased to 20.5% for Six
Months 2000 as compared to 19.4% for Six Months 1999. The increase in percent of
net sales resulted primarily from (i) Canandaigua Wine's investment in brand
building and efforts to increase market share and (ii) the Matthew Clark,
Franciscan and Simi Acquisitions, as Matthew Clark and Franciscan's selling,
general and administrative expenses as a percent of net sales is typically at
the high end of the range of the Company's operating segments' percentages.
NONRECURRING CHARGES
The Company incurred nonrecurring charges of $5.5 million in Six Months
2000 related to the closure of a production facility within the Matthew Clark
operating segment in the United Kingdom and to a management reorganization
within the Canandaigua Wine operating segment. No such charges were incurred in
Six Months 1999.
<PAGE>
- 20 -
OPERATING INCOME
The following table sets forth the operating profit/(loss) (in thousands of
dollars) by operating segment of the Company for Six Months 2000 and Six Months
1999.
Six Months 2000 Compared to Six Months 1999
-------------------------------------------
Operating Profit/(Loss)
-------------------------------------------
%Increase/
2000 1999 (Decrease)
--------- -------- ----------
Canandaigua Wine $ 16,019 $ 17,661 (9.3)%
Barton 73,459 54,620 34.5 %
Matthew Clark 19,310 -- N/A
Franciscan 1,571 -- N/A
Corporate Operations and Other (6,440) (5,770) 11.6 %
--------- --------
Consolidated Operating Profit $ 103,919 $ 66,511 56.2 %
========= ========
As a result of the above factors, consolidated operating income increased
to $103.9 million for Six Months 2000 from $66.5 million for Six Months 1999, an
increase of $37.4 million, or 56.2%. Operating income for the Canandaigua Wine
operating segment was down $1.6 million, or 9.3%, due to the nonrecurring charge
of $2.6 million related to the segment's management reorganization, as well as
additional marketing expenses associated with new product introductions.
Exclusive of the nonrecurring charge, operating income increased by 5.2% to
$18.6 million in Six Months 2000. Operating income for the Matthew Clark
operating segment, excluding nonrecurring charges of $2.9 million, was $22.3
million.
INTEREST EXPENSE, NET
Net interest expense increased to $50.7 million for Six Months 2000 from
$16.0 million for Six Months 1999, an increase of $34.7 million or 217.7%. The
increase resulted primarily from additional interest expense associated with the
borrowings related to the Matthew Clark, Black Velvet, Franciscan and Simi
Acquisitions.
NET INCOME
As a result of the above factors, net income increased to $31.9 million for
Six Months 2000 from $29.8 million for Six Months 1999, an increase of $2.1
million, or 7.1%.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Six Months 2000
were $138.1 million, an increase of $54.6 million over EBITDA of $83.5 million
for Six Months 1999. EBITDA should not be construed as an alternative to
operating income or net cash flow from operating activities and should not be
construed as an indication of operating performance or as a measure of
liquidity.
<PAGE>
- 21 -
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
- -----------------------------------------
GENERAL
The Company's principal use of cash in its operating activities is for
purchasing and carrying inventories. The Company's primary source of liquidity
has historically been cash flow from operations, except during the annual fall
grape harvests when the Company has relied on short-term borrowings. The annual
grape crush normally begins in August and runs through October. The Company
generally begins purchasing grapes in August with payments for such grapes
beginning to come due in September. The Company's short-term borrowings to
support such purchases generally reach their highest levels in November or
December. Historically, the Company has used cash flow from operating activities
to repay its short-term borrowings. The Company will continue to use its
short-term borrowings to support its working capital requirements. The Company
believes that cash provided by operating activities and its financing
activities, primarily short-term borrowings, will provide adequate resources to
satisfy its working capital, liquidity and anticipated capital expenditure
requirements for both its short-term and long-term capital needs.
SIX MONTHS 2000 CASH FLOWS
OPERATING ACTIVITIES
Net cash provided by operating activities for Six Months 2000 was $59.1
million, which resulted from $63.9 million in net income adjusted for noncash
items, less $4.8 million representing the net change in the Company's operating
assets and liabilities. The net change in operating assets and liabilities
resulted primarily from a seasonal increase in accounts receivable, partially
offset by increases in accrued income taxes, accrued advertising and promotion
expenses and accrued grape purchases.
INVESTING ACTIVITIES AND FINANCING ACTIVITIES
Net cash used in investing activities for Six Months 2000 was $482.2
million, which resulted primarily from net cash paid of $452.5 million for the
Black Velvet, Franciscan and Simi Acquisitions and $30.8 million of capital
expenditures, including $4.1 million for vineyards.
Net cash provided by financing activities for Six Months 2000 was $399.9
million, which resulted primarily from proceeds of $664.1 million from issuance
of long-term debt, including $400.0 million incurred in connection with the
Black Velvet and Franciscan Acquisitions and $200.0 million incurred to repay
amounts outstanding under the bank credit agreement. This amount was partially
offset by principal payments of $242.5 million of long-term debt, repayment of
$12.7 million of net revolving loan borrowings, and payment of $10.8 million of
long-term debt issuance costs.
DEBT
Total debt outstanding as of August 31, 1999, amounted to $1,367.2 million,
an increase of $441.8 million from February 28, 1999. The ratio of total debt to
total capitalization increased to 74.5% as of August 31, 1999, from 68.0% as of
February 28, 1999.
<PAGE>
- 22 -
THE COMPANY'S CREDIT AGREEMENT
During June 1999, the Company financed the purchase price for the
Franciscan Acquisition through additional term loan borrowings under the bank
credit agreement. The Company financed the purchase price for the Simi
Acquisition with revolving loan borrowings under the bank credit agreement.
During August 1999 as discussed below, a portion of the Company's
borrowings under its bank credit agreement were repaid with the net proceeds of
its senior notes offering.
As of August 31, 1999, under its bank credit agreement, the Company had
outstanding term loans of $690.7 million bearing interest at 7.8%, $75.0 million
of revolving loans bearing interest at 7.9%, undrawn revolving letters of credit
of $10.4 million, and $214.6 million in revolving loans available to be drawn.
On October 6, 1999, the Company, certain of its principal operating
subsidiaries, and a syndicate of banks (the "Syndicate Banks"), for which The
Chase Manhattan Bank acts as administrative agent, entered into a new senior
credit agreement (the "2000 Credit Agreement"). The 2000 Credit Agreement
includes both U.S. dollar and British pound sterling commitments of the
Syndicate Banks of up to, in the aggregate, the equivalent of $1.0 billion
(subject to increase as therein provided to $1.2 billion). Proceeds of the 2000
Credit Agreement were used to repay all outstanding principal and accrued
interest on all loans under the Company's prior bank credit agreement, and are
available to fund permitted acquisitions and ongoing working capital needs of
the Company and its subsidiaries.
The 2000 Credit Agreement provides for a $380.0 million Tranche I Term Loan
facility due in December 2004, a $320.0 million Tranche II Term Loan facility
available for borrowing in British pound sterling due in December 2004, and a
$300.0 million Revolving Credit facility (including letters of credit up to a
maximum of $20.0 million) which expires in December 2004. The Tranche I Term
Loan facility requires quarterly repayments, starting at $12.0 million in March
2000 and increasing thereafter annually with final payments of $23.0 million in
each quarter in 2004. The Tranche II Term Loan facility requires quarterly
repayments of $1.6 million for each quarter in 2000, $3.2 million for each
quarter in 2001 and 2002, $4.0 million for each quarter in 2003 and $68.0
million in each quarter in 2004 (all such repayments shall be in British pound
sterling and the foregoing amounts reflect the U.S. dollar equivalents at
closing on October 6, 1999). There are certain mandatory term loan prepayments,
including those based on sale of assets and issuance of debt and equity, in each
case subject to baskets, exceptions and thresholds which are generally more
favorable to the Company than those contained in its prior bank credit
agreement.
The rate of interest payable, at the Company's option, is a function of the
London interbank offering rate (LIBOR) plus a margin, federal funds rate plus a
margin, or the prime rate plus a margin. The margin is adjustable based upon the
Company's Debt Ratio (as defined in the 2000 Credit Agreement) and, with respect
to LIBOR borrowings, ranges between 0.75% and 1.25% for Revolving Credit loans
and 1.00% and 1.75% for Term Loans. The initial margin for all loans was set at
the highest level at closing and is subject to reduction after November 30,
1999, depending on the Company's Debt Ratio. In addition to interest, the
Company pays a facility fee on the Revolving Credit commitments, initially at
0.50% per annum and subject to reduction after November 30, 1999, to 0.25%,
depending on the Company's Debt Ratio.
Certain of the Company's principal operating subsidiaries have guaranteed
the Company's obligations under the 2000 Credit Agreement. In addition, subject
to certain limitations applicable to
<PAGE>
- 23 -
inactive subsidiaries and to some of the Company's foreign subsidiaries, all of
the capital stock of each operating wholly-owned subsidiary (other than the
subsidiaries of Matthew Clark) has been pledged to the Syndicate Banks as
security for the obligations under the 2000 Credit Agreement.
The Company and its subsidiaries are subject to customary secured lending
covenants including those restricting additional liens, incurring additional
indebtedness, the sale of assets, the payment of dividends, transactions with
affiliates and the making of certain investments, in each case subject to
baskets, exceptions and thresholds which are generally more favorable to the
Company than those contained in its prior bank credit agreement. The primary
financial covenants require the maintenance of a debt coverage ratio, a senior
debt coverage ratio, a fixed charges ratio and an interest coverage ratio. Among
the most restrictive covenants contained in the 2000 Credit Agreement is the
requirement to maintain a fixed charges ratio of not less than 1.0 at the last
day of each fiscal quarter for the most recent four quarters.
As of October 14, 1999, under the 2000 Credit Agreement, the Company had
outstanding term loans of $700.0 million bearing interest at 7.9%, $69.0 million
of revolving loans bearing interest at 7.4%, undrawn revolving letters of credit
of $10.4 million, and $220.6 million in revolving loans available to be drawn.
SENIOR NOTES
On August 4, 1999, the Company issued $200.0 million aggregate principal
amount of 8 5/8% Senior Notes due August 2006 (the "Senior Notes"). The net
proceeds of the offering (approximately $196.0 million) was used to repay a
portion of the Company's borrowings under its bank credit agreement. Interest on
the Senior Notes is payable semiannually on February 1 and August 1 of each
year, beginning February 1, 2000. The Senior Notes are redeemable at the option
of the Company, in whole or in part, at any time. The Senior Notes are unsecured
senior obligations and rank equally in right of payment to all existing and
future unsecured senior indebtedness of the Company. The Senior Notes are
guaranteed, on a senior basis, by certain of the Company's significant operating
subsidiaries.
SENIOR SUBORDINATED NOTES
As of August 31, 1999, the Company had outstanding $195.0 million aggregate
principal amount of 8 3/4% Senior Subordinated Notes due December 2003 (the
"Notes"). The Notes are currently redeemable, in whole or in part, at the option
of the Company.
On March 4, 1999, the Company issued $200.0 million aggregate principal
amount of 8 1/2% Senior Subordinated Notes due March 2009 (the "Senior
Subordinated Notes"). The net proceeds of the offering (approximately $195.0
million) were used to fund the Black Velvet Acquisition and to pay the fees and
expenses related thereto with the remainder of the net proceeds used for general
corporate purposes. Interest on the Senior Subordinated Notes is payable
semiannually on March 1 and September 1 of each year, beginning September 1,
1999. The Senior Subordinated Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after March 1, 2004. The Company may also
redeem up to $70.0 million of the Senior Subordinated Notes using the proceeds
of certain equity offerings completed before March 1, 2002. The Senior
Subordinated Notes are unsecured and subordinated to the prior payment in full
of all senior indebtedness of the Company, which includes the bank credit
agreement. The Senior Subordinated Notes are guaranteed, on a senior
subordinated basis, by certain of the Company's significant operating
subsidiaries.
<PAGE>
- 24 -
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 requires that every
derivative be recorded as either an asset or liability in the balance sheet and
measured at its fair value. SFAS No. 133 also requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 ("SFAS No. 137"), "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
FASB Statement No. 133." SFAS No. 137 delays the effective date of SFAS No. 133
for one year. With the issuance of SFAS No. 137, the Company is required to
adopt SFAS No. 133 on a prospective basis for interim periods and fiscal years
beginning March 1, 2001. The Company believes the effect of adoption on its
financial statements will not be material based on the Company's current risk
management strategies.
YEAR 2000 ISSUE
The Company has in place detailed programs to address Year 2000 readiness
in its internal systems and with its key customers and suppliers. The Year 2000
issue is the result of computer logic that was written using two digits rather
than four to define the applicable year. Any computer logic that processes
date-sensitive information may recognize the date using "00" as the year 1900
rather than the year 2000, which could result in miscalculations or system
failures.
Pursuant to the Company's readiness programs, all major categories of
information technology systems and non-information technology systems (i.e.,
equipment with embedded microprocessors) in use by the Company, including
manufacturing, sales, financial and human resources, have been inventoried and
assessed. In addition, plans have been developed for the required systems
modifications or replacements. With respect to its information technology
systems, the Company has completed both the assessment and remediation phases.
With respect to its non-information technology systems, the Company has
completed the entire assessment phase and approximately 97% of the remediation
phase. Final testing in selected areas, both internal and external, has
confirmed the integrity of the Company's remediation programs. The Company's
internal mission-critical information technology and non-information technology
systems are Year 2000 compliant.
The Company has communicated with its major customers, suppliers and
financial institutions to assess the potential impact on the Company's
operations if those third parties fail to become Year 2000 compliant in a timely
manner. Based upon responses to date, it appears that many of those customers
and suppliers have only indicated that they have in place Year 2000 readiness
programs, without specifically confirming that they will be Year 2000 compliant
in a timely manner. Risk assessment, readiness evaluation, action plans and
contingency plans related to the Company's significant customers and suppliers
have been virtually completed. The Company's key financial institutions have
been surveyed and it is the Company's understanding that they are Year 2000
compliant.
<PAGE>
- 25 -
The costs incurred to date related to its Year 2000 activities have not
been material to the Company, and, based upon current estimates, the Company
does not believe that the total cost of its Year 2000 readiness programs will
have a material adverse impact on the Company's financial condition, results of
operations or cash flows.
The Company's readiness programs also include the development of
contingency plans to protect its business and operations from Year 2000-related
interruptions. These plans are expected to be completed by October 31, 1999,
and, by way of examples, will include back-up procedures, identification of
alternate suppliers, where possible, and increases in inventory levels. Based
upon the Company's current assessment of its non-information technology systems,
the Company does not believe it necessary to develop an extensive contingency
plan for those systems. There can be no assurances, however, that any of the
Company's contingency plans will be sufficient to handle all problems or issues
which may arise.
The Company believes that it is taking reasonable steps to identify and
address those matters that could cause serious interruptions in its business and
operations due to Year 2000 issues. However, delays in the implementation of new
systems, a failure to fully identify all Year 2000 dependencies in the Company's
systems and in the systems of its suppliers, customers and financial
institutions, a failure of such third parties to adequately address their
respective Year 2000 issues, or a failure of a contingency plan could have a
material adverse effect on the Company's business, financial condition, results
of operations or cash flows. For example, the Company would experience a
material adverse impact on its business if significant suppliers of beer, glass
or other raw materials, or utility systems fail to timely provide the Company
with necessary inventories or services due to Year 2000 systems failures.
The statements set forth herein concerning Year 2000 issues which are not
historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. In particular, the costs associated with the
Company's Year 2000 programs and the time-frame in which the Company plans to
complete Year 2000 modifications are based upon management's best estimates.
These estimates were derived from internal assessments and assumptions of future
events. These estimates may be adversely affected by the continued availability
of personnel and system resources, and by the failure of significant third
parties to properly address Year 2000 issues. Therefore, there can be no
guarantee that any estimates, or other forward-looking statements will be
achieved, and actual results could differ significantly from those contemplated.
EURO CONVERSION ISSUES
Effective January 1, 1999, eleven of the fifteen member countries of the
European Union (the "Participating Countries") established fixed conversion
rates between their existing sovereign currencies and the euro. For three years
after the introduction of the euro, the Participating Countries can perform
financial transactions in either the euro or their original local currencies.
This will result in a fixed exchange rate among the Participating Countries,
whereas the euro (and the Participating Countries' currency in tandem) will
continue to float freely against the U.S. dollar and other currencies of the
non-participating countries. The Company does not believe that the effects of
the conversion will have a material adverse effect on the Company's business and
operations.
<PAGE>
- 26 -
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------- ----------------------------------------------------------
Information about market risks for the six months ended August 31, 1999,
does not differ materially from that discussed under Item 7A in the Company's
Annual Report on Form 10-K for the fiscal year ended February 28, 1999.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
At the Annual Meeting of Stockholders of Canandaigua Brands, Inc., held on
July 20, 1999 (the "Annual Meeting"), the holders of the Company's Class A
Common Stock (the "Class A Stock"), voting as a separate class, elected
management's slate of director nominees designated to be elected by the holders
of the Class A Stock, and the holders of the Company's Class B Common Stock (the
"Class B Stock"), voting as a separate class, elected management's slate of
director nominees designated to be elected by the holders of the Class B Stock.
In addition, at the Annual Meeting, the holders of Class A Stock and the
holders of Class B Stock, voting together as a single class, voted upon the
following proposals:
(i) Proposal to approve Amendment Number 6 to the Company's 1989
Employee Stock Purchase Plan. (This Amendment grants the committee
administering the plan the authority to designate the subsidiaries
of the Company whose employees are eligible to participate in the
plan.)
(ii) Proposal to approve Amendment Number Two to the Company's Long-Term
Stock Incentive Plan. (This Amendment increases the aggregate number
of shares of the Class A Common Stock available for awards under the
plan from 4,000,000 shares to 7,000,000 shares.)
(iii) Proposal to ratify the selection of Arthur Andersen LLP, Certified
Public Accountants, as the Company's independent auditors for the
fiscal year ending February 29, 2000.
Set forth below is the number of votes cast for, against or withheld, as
well as the number of abstentions and broker nonvotes, as applicable, as to each
of the foregoing matters.
I. The results of the voting for the election of Directors of the
Company are as follows:
Directors Elected By the Holders of Class A Stock:
--------------------------------------------------
Nominee For Withheld
------------------- ---------- --------
Thomas C. McDermott 12,616,998 91,925
Paul L. Smith 12,617,056 91,867
<PAGE>
- 27 -
Directors Elected By the Holders of Class B Stock:
--------------------------------------------------
Nominee For Withheld
------------------- ---------- --------
George Bresler 30,958,690 60,000
James A. Locke, III 30,960,190 58,500
Marvin Sands 30,960,190 58,500
Richard Sands 30,955,090 63,600
Robert Sands 30,955,090 63,600
II. The proposal to approve Amendment Number 6 to the Company's 1989
Employee Stock Purchase Plan was approved with the following votes:
For: 42,506,828
Against: 1,115,603
Abstain: 49,272
Broker Nonvotes: 55,910
III. The proposal to approve Amendment Number Two to the Company's
Long-Term Stock Incentive Plan was approved with the following
votes:
For: 33,170,879
Against: 7,609,424
Abstain: 53,944
Broker Nonvotes: 2,893,366
IV. The selection of Arthur Andersen LLP was ratified with the following
votes:
For: 43,662,767
Against: 6,487
Abstain: 58,359
Broker Nonvotes: 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) See Index to Exhibits located on Page 34 of this Report.
(b) The following Reports on Form 8-K were filed with the Securities and
Exchange Commission during the quarter ended August 31, 1999:
(i) Form 8-K/A dated April 9, 1999. This Form 8-K reported
information under Item 7 (Financial Statements and Exhibits).
The following financial statements were filed with this Form
8-K/A:
<PAGE>
- 28 -
The Diageo Inc. Statement of Assets and Liabilities
Related to the Product Lines Sold to Canandaigua Brands,
Inc. as of April 9, 1999, and the Statement of
Identified Income and Expenses Related to the Product
Lines Sold to Canandaigua Brands, Inc. for the year
ended December 31, 1998, and the report of KPMG LLP,
independent auditors, thereon, together with the notes
thereto.
The pro forma condensed combined balance sheet
(unaudited) as of February 28, 1999, and the pro forma
condensed combined statement of income (unaudited) for
the year ended February 28, 1999, and the notes thereto.
(ii) Form 8-K dated June 4, 1999. This Form 8-K reported
information under Item 2 (Acquisition or Disposition of
Assets) and Item 7 (Financial Statements and Exhibits).
(iii) Form 8-K dated June 8, 1999. This Form 8-K reported
information under Item 5 (Other Events).
(iv) Form 8-K dated June 23, 1999. This Form 8-K reported
information under Item 5 (Other Events) and included (i) the
Company's Condensed Consolidated Balance Sheets as of May 31,
1999 and February 28, 1999; and (ii) the Company's Condensed
Consolidated Statements of Income for the three months ended
May 31, 1999 (unaudited) and May 31, 1998 (unaudited).
(v) Form 8-K dated July 28, 1999. This Form 8-K reported
information under Item 7 (Financial Statements and Exhibits).
<PAGE>
- 29 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CANANDAIGUA BRANDS, INC.
Dated: October 15, 1999 By: /s/ Thomas F. Howe
------------------
Thomas F. Howe, Vice President,
Corporate Reporting and Controller
Dated: October 15, 1999 By: /s/ Thomas S. Summer
--------------------
Thomas S. Summer, Senior Vice
President and Chief Financial
Officer (Principal Financial
Officer and Principal Accounting
Officer)
SUBSIDIARIES
BATAVIA WINE CELLARS, INC.
Dated: October 15, 1999 By: /s/ Thomas F. Howe
------------------
Thomas F. Howe, Controller
Dated: October 15, 1999 By: /s/ Thomas S. Summer
--------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
CANANDAIGUA WINE COMPANY, INC.
Dated: October 15, 1999 By: /s/ Thomas F. Howe
------------------
Thomas F. Howe, Controller
Dated: October 15, 1999 By: /s/ Thomas S. Summer
--------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
<PAGE>
- 30 -
CANANDAIGUA EUROPE LIMITED
Dated: October 15, 1999 By: /s/ Thomas F. Howe
------------------
Thomas F. Howe, Controller
Dated: October 15, 1999 By: /s/ Thomas S. Summer
--------------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
CANANDAIGUA LIMITED
Dated: October 15, 1999 By: /s/ Thomas F. Howe
------------------
Thomas F. Howe, Authorized Officer
Dated: October 15, 1999 By: /s/ Thomas S. Summer
--------------------------
Thomas S. Summer, Finance Director
(Principal Financial Officer and
Principal Accounting Officer)
POLYPHENOLICS, INC.
Dated: October 15, 1999 By: /s/ Thomas F. Howe
------------------
Thomas F. Howe, Vice President
and Controller
Dated: October 15, 1999 By: /s/ Thomas S. Summer
--------------------------
Thomas S. Summer, Vice President
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
ROBERTS TRADING CORP.
Dated: October 15, 1999 By: /s/ Thomas F. Howe
------------------
Thomas F. Howe, Controller
Dated: October 15, 1999 By: /s/ Thomas S. Summer
--------------------------
Thomas S. Summer, President and
Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
<PAGE>
- 31 -
BARTON INCORPORATED
Dated: October 15, 1999 By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President and
Chief Executive Officer
Dated: October 15, 1999 By: /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON BRANDS, LTD.
Dated: October 15, 1999 By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, Executive Vice
President
Dated: October 15, 1999 By: /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON BEERS, LTD.
Dated: October 15, 1999 By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, Executive Vice
President
Dated: October 15, 1999 By: /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON BRANDS OF CALIFORNIA, INC.
Dated: October 15, 1999 By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President
Dated: October 15, 1999 By: /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
<PAGE>
- 32 -
BARTON BRANDS OF GEORGIA, INC.
Dated: October 15, 1999 By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President
Dated: October 15, 1999 By: /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON DISTILLERS IMPORT CORP.
Dated: October 15, 1999 By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President
Dated: October 15, 1999 By: /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
BARTON FINANCIAL CORPORATION
Dated: October 15, 1999 By: /s/ Raymond E. Powers
---------------------
Raymond E. Powers, President and
Secretary
Dated: October 15, 1999 By: /s/ Charles T. Schlau
---------------------
Charles T. Schlau, Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
STEVENS POINT BEVERAGE CO.
Dated: October 15, 1999 By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, Executive Vice
President
Dated: October 15, 1999 By: /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
<PAGE>
- 33 -
MONARCH IMPORT COMPANY
Dated: October 15, 1999 By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President
Dated: October 15, 1999 By: /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
THE VIKING DISTILLERY, INC.
Dated: October 15, 1999 By: /s/ Alexander L. Berk
---------------------
Alexander L. Berk, President
Dated: October 15, 1999 By: /s/ Raymond E. Powers
---------------------
Raymond E. Powers, Executive Vice
President, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
<PAGE>
- 34 -
INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION.
2.1 Asset Purchase Agreement dated as of February 21, 1999 by and among Diageo
Inc., UDV Canada Inc., United Distillers Canada Inc. and the Company
(filed as Exhibit 2 to the Company's Current Report on Form 8-K dated
April 9, 1999 and incorporated herein by reference).
2.2 Stock Purchase Agreement, dated April 21, 1999, between Franciscan
Vineyards, Inc., Agustin Huneeus, Agustin Francisco Huneeus, Jean-Michel
Valette, Heidrun Eckes-Chantre Und Kinder Beteiligungsverwaltung II, GbR,
Peter Eugen Eckes Und Kinder Beteiligungsverwaltung II, GbR, Harald
Eckes-Chantre, Christina Eckes-Chantre, Petra Eckes-Chantre and
Canandaigua Brands, Inc. (filed as Exhibit 2.1 on the Company's Current
Report on Form 8-K dated June 4, 1999 and incorporated herein by
reference).
2.3 Stock Purchase Agreement by and between Canandaigua Wine Company, Inc. (a
wholly-owned subsidiary of the Company) and Moet Hennessy, Inc. dated
April 1, 1999 (including a list briefly identifying the contents of all
omitted schedules thereto) (filed as exhibit 2.3 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 1999
and incorporated herein by reference).
(3) ARTICLES OF INCORPORATION AND BY-LAWS.
3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended August 31, 1998 and incorporated herein by reference).
3.2 Amended and Restated By-Laws of the Company (filed as Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 1998 and incorporated herein by reference).
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Indenture, dated as of December 27, 1993, among the Company, its
Subsidiaries and The Chase Manhattan Bank (as successor to Chemical Bank),
as Trustee (filed as Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended November 30, 1993 and incorporated
herein by reference).
4.2 First Supplemental Indenture, dated as of August 3, 1994, among the
Company, Canandaigua West, Inc. (a subsidiary of the Company now known as
Canandaigua Wine Company, Inc.) and The Chase Manhattan Bank (as successor
to Chemical Bank), as Trustee (filed as Exhibit 4.5 to the Company's
Registration Statement on Form S-8 (Registration No. 33-56557) and
incorporated herein by reference).
4.3 Second Supplemental Indenture, dated August 25, 1995, among the Company, V
Acquisition Corp. (a subsidiary of the Company now known as The Viking
Distillery, Inc.) and The Chase Manhattan Bank (as successor to Chemical
Bank), as Trustee (filed as Exhibit 4.5 to the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1995 and incorporated
herein by reference).
<PAGE>
- 35 -
4.4 Third Supplemental Indenture, dated as of December 19, 1997, among the
Company, Canandaigua Europe Limited, Roberts Trading Corp. and The Chase
Manhattan Bank, as Trustee (filed as Exhibit 4.4 to the Company's Annual
Report on Form 10-K for the fiscal year ended February 28, 1998 and
incorporated herein by reference).
4.5 Fourth Supplemental Indenture, dated as of October 2, 1998, among the
Company, Polyphenolics, Inc. and The Chase Manhattan Bank, as Trustee
(filed as Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 1998 and incorporated herein by
reference).
4.6 Fifth Supplemental Indenture, dated as of December 11, 1998, among the
Company, Canandaigua B.V., Canandaigua Limited and The Chase Manhattan
Bank, as Trustee (filed as Exhibit 4.6 to the Company's Annual Report on
Form 10-K for the fiscal year ended February 28, 1999 and incorporated
herein by reference).
4.7 Sixth Supplemental Indenture, dated as of July 28, 1999, among the
Company, Barton Canada, Ltd., Simi Winery, Inc., Franciscan Vineyards,
Inc., Allberry, Inc., M.J. Lewis Corp., Cloud Peak Corporation, Mt. Veeder
Corporation, SCV-EPI Vineyards, Inc., and The Chase Manhattan Bank, as
Trustee (filed herewith).
4.8 Indenture with respect to the 8 3/4% Series C Senior Subordinated Notes
Due 2003, dated as of October 29, 1996, among the Company, its
Subsidiaries and Harris Trust and Savings Bank, as Trustee (filed as
Exhibit 4.2 to the Company's Registration Statement on Form S-4
(Registration No. 333-17673) and incorporated herein by reference).
4.9 First Supplemental Indenture, dated as of December 19, 1997, among the
Company, Canandaigua Europe Limited, Roberts Trading Corp. and Harris
Trust and Savings Bank, as Trustee (filed as Exhibit 4.6 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 28, 1998 and
incorporated herein by reference).
4.10 Second Supplemental Indenture, dated as of October 2, 1998, among the
Company, Polyphenolics, Inc. and Harris Trust and Savings Bank, as Trustee
(filed as Exhibit 4.8 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 1998 and incorporated herein by
reference).
4.11 Third Supplemental Indenture, dated as of December 11, 1998, among the
Company, Canandaigua B.V., Canandaigua Limited and Harris Trust and
Savings Bank, as Trustee (filed as Exhibit 4.10 to the Company's Annual
Report on Form 10-K for the fiscal year ended February 28, 1999 and
incorporated herein by reference).
4.12 Fourth Supplemental Indenture, dated as of July 28, 1999, among the
Company, Barton Canada, Ltd., Simi Winery, Inc., Franciscan Vineyards,
Inc., Allberry, Inc., M.J. Lewis Corp., Cloud Peak Corporation, Mt. Veeder
Corporation, SCV-EPI Vineyards, Inc., and Harris Trust and Savings Bank,
as Trustee (filed herewith).
4.13 First Amended and Restated Credit Agreement, dated as of November 2, 1998,
between the Company, certain principal operating subsidiaries, and certain
banks for which The Chase Manhattan Bank acts as Administrative Agent
(filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated
December 1, 1998 and incorporated herein by reference).
<PAGE>
- 36 -
4.14 Second Amended and Restated Credit Agreement, dated as of May 12, 1999,
between the Company, certain principal operating subsidiaries, and certain
banks for which The Chase Manhattan Bank acts as Administrative Agent
(filed as Exhibit 4.2 to the Company's Current Report on Form 8-K dated
June 4, 1999 and incorporated herein by reference).
4.15 Incremental Facility Loan Agreement, dated as of May 27, 1999, between the
Company, certain principal operating subsidiaries, and certain banks for
which The Chase Manhattan Bank acts as Administrative Agent (filed as
Exhibit 4.3 to the Company's Current Report on Form 8-K dated June 4, 1999
and incorporated herein by reference).
4.16 Amendment No. 1 to the Second Amended and Restated Credit Agreement, dated
as of August 4, 1999, between the Company, certain principal operating
subsidiaries, and certain banks for which The Chase Manhattan Bank acts as
Administrative Agent (filed herewith).
4.17 Indenture with respect to 8 1/2% Senior Subordinated Notes due 2009, dated
as of February 25, 1999, among the Company, as issuer, certain principal
operating subsidiaries, as Guarantors, and Harris Trust and Savings Bank,
as Trustee (filed as Exhibit 99.1 to the Company's Current Report on Form
8-K dated February 25, 1999 and incorporated herein by reference).
4.18 Supplemental Indenture No. 1, dated as of February 25, 1999, by and among
the Company, as Issuer, its principal operating subsidiaries, as
Guarantors, and Harris Trust and Savings Bank, as Trustee (filed as
Exhibit 99.2 to the Company's Current Report on Form 8-K dated February
25, 1999 and incorporated herein by reference).
4.19 Supplemental Indenture No. 2, dated as of August 4, 1999, by and among the
Company, as Issuer, its principal operating subsidiaries, as Guarantors,
and Harris Trust and Savings Bank, as Trustee (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K dated July 28, 1999 and incorporated
herein by reference).
4.20 Supplemental Indenture No. 3, dated as of August 6, 1999, by and among the
Company, Canandaigua B.V., Barton Canada, Ltd., Simi Winery, Inc.,
Franciscan Vineyards, Inc., Allberry, Inc., M.J. Lewis Corp., Cloud Peak
Corporation, Mt. Veeder Corporation, SCV-EPI Vineyards, Inc., and Harris
Trust and Savings Bank, as Trustee (filed herewith).
(10) MATERIAL CONTRACTS.
Amendment Number Two to the Company's Long-Term Stock Incentive Plan
(filed herewith).
(11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS.
Computation of per share earnings (filed herewith).
(15) LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION.
Not applicable.
(18) LETTER RE CHANGE IN ACCOUNTING PRINCIPLES.
Not applicable.
<PAGE>
- 37 -
(19) REPORT FURNISHED TO SECURITY HOLDERS.
Not applicable.
(22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO A VOTE OF SECURITY
HOLDERS.
Not applicable.
(23) CONSENTS OF EXPERTS AND COUNSEL.
Not applicable.
(24) POWER OF ATTORNEY.
Not applicable.
(27) FINANCIAL DATA SCHEDULE.
Financial Data Schedule (filed herewith).
(99) ADDITIONAL EXHIBITS.
Not applicable.
EXHIBIT 4.7
-----------
SIXTH SUPPLEMENTAL INDENTURE (the "Supplement"), dated as of July 28, 1999,
is entered into by and among CANANDAIGUA BRANDS, INC. (formerly known as
Canandaigua Wine Company, Inc.), a Delaware corporation (the "Company"), and
Barton Canada, Ltd., an Illinois corporation, Simi Winery, Inc., a California
corporation, Franciscan Vineyards, Inc., a Delaware corporation, Allberry, Inc.,
a California corporation, M.J. Lewis Corp., a California corporation, Cloud Peak
Corporation, a California corporation, Mt. Veeder Corporation, a California
corporation and SCV-EPI Vineyards, Inc., a New York corporation, each being,
directly or indirectly, a wholly-owned subsidiary of the Company (individually
the "New Guarantor" and collectively the "New Guarantors") and THE CHASE
MANHATTAN BANK, a New York banking corporation, as Trustee (the "Trustee").
RECITALS OF THE COMPANY AND THE NEW GUARANTORS
WHEREAS, the Company, the Guarantors and the Trustee have executed and
delivered an Indenture, dated as of December 27, 1993, as supplemented, among
the Company, the Guarantors and the Trustee (the "Indenture") providing for the
issuance by the Company of $130,000,000 aggregate principal amount of the
Company's 8 3/4% Senior Subordinated Notes due 2003 (the "Securities") and
pursuant to which the Guarantors have agreed to guarantee, jointly and
severally, the full and punctual payment and performance when due of all
Indenture Obligations.
WHEREAS, the New Guarantors have become Subsidiaries and pursuant to
Section 1014(b) of the Indenture are obligated to enter into the Supplement
thereby guaranteeing the punctual payment and performance when due of all
Indenture Obligations;
WHEREAS, pursuant to Section 901(e) of the Indenture, the Company, the New
Guarantors and the Trustee may enter into this Supplement without the consent of
any Holder;
WHEREAS, the execution and delivery of this Supplement have been duly
authorized by a Board Resolution of the respective Boards of Directors of the
Company and the New Guarantors; and
WHEREAS, all conditions and requirements necessary to make the Supplement
valid and binding upon the Company and the New Guarantors, and enforceable
against the Company and the New Guarantors in accordance with its terms, have
been performed and fulfilled;
NOW, THEREFORE, in consideration of the above premises, each of the parties
hereto agrees, for the benefit of the others and for the equal and proportionate
benefit of the Holders of the Securities, as follows:
ARTICLE ONE
THE NEW GUARANTEE
Section 1.01. For value received, the New Guarantors, in accordance with
Article Fourteen of the Indenture, hereby absolutely, unconditionally and
irrevocably guarantee (the
<PAGE>
"New Guarantee"), jointly and severally among themselves and the Guarantors, to
the Trustee and the Holders, as if each New Guarantor was the principal debtor,
the punctual payment and performance when due of all Indenture Obligations
(which for purposes of the New Guarantee shall also be deemed to include all
commissions, fees, charges, costs and other expenses (including reasonable legal
fees and disbursements of one counsel) arising out of or incurred by the Trustee
or the Holders in connection with the enforcement of the New Guarantee). The
agreements made and obligations assumed hereunder by the New Guarantors shall
constitute and shall be deemed to constitute a Guarantee under the Indenture and
for all purposes of the Indenture, and each New Guarantor shall be considered a
Guarantor for all purposes of the Indenture as if each New Guarantor was
originally named therein as a Guarantor.
Section 102. The New Guarantee shall be automatically and unconditionally
released and discharged upon the occurrence of the events set forth in Section
1014(c) of the Indenture.
Section 103. The New Guarantors hereby waive and will not in any manner
whatsoever, claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Subsidiary as a result of any payment by such New Guarantors under
its Guarantee under the Indenture.
ARTICLE TWO
MISCELLANEOUS
Section 201. Except as otherwise expressly provided or unless the context
otherwise requires, all terms used herein which are defined in the Indenture
shall have the meanings assigned to them in the Indenture. Except as
supplemented hereby, the Indenture (including the Guarantees incorporated
therein) and the Securities are in all respects ratified and confirmed and all
the terms and provisions thereof shall remain in full force and effect.
Section 202. This Supplement shall be deemed effective as of the close of
business on June 4, 1999.
Section 203. The recitals contained herein shall be taken as the statements
of the Company and the New Guarantors, and the Trustee assumes no responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Supplement.
Section 204. This Supplement shall be governed by and construed in
accordance with the laws of the jurisdiction which govern the Indenture and its
construction.
Section 2.05. This Supplement may be executed in any number of counterparts
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be
duly executed and their respective seals to be affixed hereunto and duly
attested all as of the day and year first above written.
CANANDAIGUA BRANDS, INC.
[Corporate Seal] By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Senior Vice President and
Chief Financial Officer
Attest: /s/David S. Sorce
-----------------
Title: Secretary
BARTON CANADA, LTD.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President
SIMI WINERY, INC.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: President and Treasurer
FRANCISCAN VINEYARDS, INC.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
ALLBERRY, INC.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
<PAGE>
M.J. LEWIS CORP.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
CLOUD PEAK CORPORATION
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
MT. VEEDER CORPORATION
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
SCV-EPI VINEYARDS, INC.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
THE CHASE MANHATTAN BANK
[Corporate Seal] By: /s/J. D. Heaney
-----------------------------------
Name: J. D. Heaney
Title: Vice President
Attest: /s/R. Lorenzen
--------------------
Title: Senior Trust Officer
EXHIBIT 4.12
------------
FOURTH SUPPLEMENTAL INDENTURE (the "Supplement"), dated as of July 28,
1999, is entered into by and among CANANDAIGUA BRANDS, INC. (formerly known as
Canandaigua Wine Company, Inc.), a Delaware corporation (the "Company"), Barton
Canada, Ltd., an Illinois corporation, Simi Winery, Inc., a California
corporation, Franciscan Vineyards, Inc., a Delaware corporation, Allberry, Inc.,
a California corporation, M.J. Lewis Corp., a California corporation, Cloud Peak
Corporation, a California corporation, Mt. Veeder Corporation, a California
corporation and SCV-EPI Vineyards, Inc., a New York corporation, each being,
directly or indirectly, a wholly-owned subsidiary of the Company (individually
the "New Guarantor" and collectively the "New Guarantors"), and HARRIS TRUST AND
SAVINGS BANK , as Trustee (the "Trustee").
RECITALS OF THE COMPANY AND THE NEW GUARANTORS
WHEREAS, the Company, the Guarantors and the Trustee have executed and
delivered an Indenture, dated as of October 29, 1996, as supplemented, among the
Company, the Guarantors and the Trustee (the "Indenture") providing for the
issuance by the Company of $65,000,000 aggregate principal amount of the
Company's 8 3/4% Senior Subordinated Notes due 2003 (the "Securities") and
pursuant to which the Guarantors have agreed to guarantee, jointly and
severally, the full and punctual payment and performance when due of all
Indenture Obligations.
WHEREAS, the New Guarantors have become Subsidiaries and pursuant to
Section 1014(b) of the Indenture are obligated to enter into the Supplement
thereby guaranteeing the punctual payment and performance when due of all
Indenture Obligations;
WHEREAS, pursuant to Section 901(e) of the Indenture, the Company, the New
Guarantors and the Trustee may enter into this Supplement without the consent of
any Holder;
WHEREAS, all conditions and requirements necessary to make the Supplement
valid and binding upon the Company and the New Guarantors, and enforceable
against the Company and the New Guarantors in accordance with its terms, have
been performed and fulfilled;
NOW, THEREFORE, in consideration of the above premises, each of the parties
hereto agrees, for the benefit of the others and for the equal and proportionate
benefit of the Holders of the Securities, as follows:
ARTICLE ONE
THE NEW GUARANTEE
Section 1.01. For value received, the New Guarantors, in accordance with
Article Fourteen of the Indenture, hereby absolutely, unconditionally and
irrevocably guarantee (the "New Guarantee"), jointly and severally among
themselves and the Guarantors, to the Trustee and the Holders, as if each New
Guarantor was the principal debtor, the punctual payment and performance when
due of all Indenture Obligations (which for purposes of the New Guarantee shall
also be deemed to include all commissions, fees, charges, costs and other
expenses (including reasonably legal fees and disbursements of one counsel)
arising out of or incurred by the Trustee or the Holders in connection with the
enforcement of this New
<PAGE>
Guarantee). The agreements made and obligations assumed hereunder by the New
Guarantors shall constitute and shall be deemed to constitute a Guarantee under
the Indenture and for all purposes of the Indenture as if each New Guarantor was
originally named therein as a Guarantor.
Section 102. The New Guarantee shall be automatically and unconditionally
released and discharged upon the occurrence of the events set forth in Section
1014(c) of the Indenture.
Section 103. The New Guarantors hereby waive and will not in any manner
whatsoever, claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Subsidiary as a result of any payment by such Subsidiary under its
Guarantee under the Indenture.
ARTICLE TWO
MISCELLANEOUS
Section 201. Except as otherwise expressly provided or unless the context
otherwise requires, all terms used herein which are defined in the Indenture
shall have the meanings assigned to them in the Indenture. Except as
supplemented hereby, the Indenture (including the Guarantees incorporated
therein) and the Securities are in all respects ratified and confirmed and all
the terms and provisions thereof shall remain in full force and effect.
Section 202. This Supplement shall be deemed effective as of the close of
business on June 4, 1999.
Section 203. The recitals contained herein shall be taken as the statements
of the Company and the New Guarantors, and the Trustee assumes no responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Supplement.
Section 204. This Supplement shall be governed by and construed in
accordance with the laws of the jurisdiction which govern the Indenture and its
construction.
Section 2.05. This Supplement may be executed in any number of counterparts
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be
duly executed and their respective seals to be affixed hereunto and duly
attested all as of the day and year first above written.
CANANDAIGUA BRANDS, INC.
[Corporate Seal] By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Senior Vice President and
Chief Financial Officer
Attest: /s/David S. Sorce
-----------------
Title: Secretary
BARTON CANADA, LTD.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President
SIMI WINERY, INC.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: President and Treasurer
FRANCISCAN VINEYARDS, INC.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
ALLBERRY, INC.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
<PAGE>
M.J. LEWIS CORP.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
CLOUD PEAK CORPORATION
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
MT. VEEDER CORPORATION
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
SCV-EPI VINEYARDS, INC.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
HARRIS TRUST AND SAVINGS BANK
[Corporate Seal] By: /s/D. G. Donovan
-----------------------------------
Name: D. G. Donovan
Title: Assistant Vice President
Attest: /s/C. Potter
----------------------
Title: Assistant Secretary
EXHIBIT 4.16
------------
[Execution Copy]
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of August 4, 1999, between CANANDAIGUA BRANDS,
INC., a Delaware corporation (the "Borrower"); each of the Subsidiaries of the
Borrower identified under the caption "SUBSIDIARY GUARANTORS" on the signature
pages hereto (individually, a "Subsidiary Guarantor" and, collectively the
"Subsidiary Guarantors" and, together with the Borrower, the "Obligors"); and
THE CHASE MANHATTAN BANK, as administrative agent for the Lenders referred to
below (in such capacity, together with its successors in such capacity, the
"Administrative Agent").
The Borrower, the Subsidiary Guarantors, certain financial institutions
(the "Lenders") and the Administrative Agent are parties to a First Amended and
Restated Credit Agreement dated as of November 2, 1998, as amended by a Second
Amended and Restated Credit Agreement dated as of May 12, 1999 (as so amended
and in effect on the date hereof, the "Credit Agreement"). The Obligors and the
Administrative Agent (having previously obtained the authorization of the
Required Lenders) wish to amend the Credit Agreement in certain respects and,
accordingly, the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this Amendment No.
1, terms defined in the Credit Agreement (as amended hereby) are used herein as
defined therein.
Section 2. AMENDMENTS. Subject to the execution and delivery of this
Amendment No. 1 by the Obligors and the Administrative Agent, but with effect on
and after the date hereof, the Credit Agreement is amended as follows:
(a) Article I of the Credit Agreement is amended by adding the
following definitions in their appropriate alphabetic locations:
"'SENIOR NOTES' means the Borrower's (i) Senior Notes due 2006
issued pursuant to the Senior Notes Indenture in an original aggregate
principal amount up to $350,000,000 and (ii) Senior Notes due 2008
issued pursuant to the Senior Notes Indenture in an original aggregate
principal amount up to (pound)200,000,000."
"'SENIOR NOTES INDENTURE' means the Indenture dated as of
February 25, 1999 between the Borrower, certain Subsidiaries and
Harris Trust and Savings Bank, as trustee, as supplemented by
Supplemental Indenture No. 1 dated as of February 25, 1999,
Supplemental Indenture No. 2 dated as of August 4, 1999 and
Supplemental Indenture No. 3 dated as of August 6, 1999 and, subject
to Section 7.13, as further supplemented and amended and in effect
from time to time.".
(b) Section 2.11(c) of the Credit Agreement is amended and restated to
read in its entirety as follows:
"(c) MANDATORY PREPAYMENTS -- CHANGE OF CONTROL. In the event
that the Borrower shall be required pursuant to the provisions of the
Senior Notes, the Senior Notes Indenture or any instrument evidencing
or governing any Subordinated Indebtedness to redeem, or make an offer
to redeem or repurchase, all or any portion of the Senior Notes (or
any Indebtedness thereunder) or such Subordinated Indebtedness as a
result of a change of control (however defined), then, concurrently
with the occurrence of the event giving rise to such change of
control, the Borrower shall prepay the Loans (and/or provide cover for
LC Exposure as specified in Section 2.06(k)) in full, and the
Commitments shall be automatically reduced to zero.".
<PAGE>
(c) Section 7.01(c) of the Credit Agreement is amended and restated to
read in its entirety as follows:
"(c) Subordinated Indebtedness and Indebtedness outstanding in
respect of the Senior Notes in an aggregate principal amount for each
series thereof not to exceed the respective original aggregate
principal amounts specified in the definition of such term, provided
that the following conditions shall be satisfied with respect to such
Indebtedness outstanding in respect of the Senior Notes (each of which
shall be fulfilled in form and substance satisfactory to the Required
Lenders):
(i) the terms of such Indebtedness shall not provide for
payment of any portion of the principal thereof prior to the date
six months after the final maturity of the Loans hereunder;
(ii) terms in respect of financial and other covenants,
events of default and mandatory prepayments applicable to such
Indebtedness shall be substantially consistent with the proposed
terms of the Senior Notes provided to the Administrative Agent by
the Borrower on or prior to August 4, 1999;
(iii) at the time of issuance of such Indebtedness, and
after giving effect thereto, the Borrower shall be in compliance
with Section 7.08 (the determination of such ratios to be
calculated under the assumption that such Indebtedness was issued
at the beginning of the respective period and that any other
Indebtedness to be retired with the proceeds thereof was in fact
retired on such date of issuance), and the Borrower shall have
delivered to the Administrative Agent a certificate of its chief
financial officer to such effect setting forth in reasonable
detail the computations necessary to determine such compliance;
and
(iv) at the time of such issuance, and after giving effect
thereto, no Default or Event of Default shall have occurred and
be continuing hereunder and the Borrower shall have delivered to
the Administrative Agent a certificate of a Financial Officer to
such effect;".
(d) Article VII of the Credit Agreement is amended by adding the
following new Section 7.13 thereto in its appropriate numeric location:
"SECTION 7.13. SENIOR NOTES. Neither the Borrower nor any of its
Subsidiaries shall purchase, redeem, retire or otherwise acquire for
value, or set apart any money for a sinking, defeasance or other
analogous fund for the purchase, redemption, retirement or other
acquisition of, or make any voluntary payment or prepayment of the
principal of or interest on, or any other amount owing in respect of,
the Senior Notes, except that the Borrower may (i) make payments on
the regularly-scheduled payment dates with respect to the principal of
and interest on the Senior Notes under the Senior Notes Indenture as
in effect on the date hereof and (ii) so long as no Default shall have
occurred and be continuing (or will occur as a result of such
payment), from the proceeds of Subordinated Indebtedness issued in
accordance with the first paragraph of Section 7.09, redeem any Senior
Notes being refinanced with such proceeds. Neither the Borrower nor
any of its Subsidiaries will consent to any modification, supplement
or waiver of any of the provisions of the Senior Notes or the Senior
Notes Indenture if such amendment, supplement or waiver would have a
material adverse effect on (x) the legal ability or financial capacity
of any Obligor to perform any of its obligations under this Agreement
<PAGE>
or any of the other Loan Documents to which it is a party or (y) the
rights of or benefits available to the Lenders under this Agreement or
any of the other Loan Documents.".
Section 3. APPLICATION OF PROCEEDS OF SENIOR NOTES. To induce the Lenders
to authorize the Administrative Agent to enter into this Amendment No. 1, the
Borrower agrees that, upon the issuance of the Senior Notes, the Borrower shall
prepay the Loans in an aggregate amount equal to the aggregate amount of cash
received by the Borrower or any of its Subsidiaries in respect of such issuance
(net of reasonable expenses incurred by the Borrower in connection therewith),
such prepayment to be applied to the Loans in the manner specified in Section
2.11(b)(vi)(B) of the Credit Agreement. The Borrower agrees that any failure of
the Borrower to observe or perform any covenant or agreement contained in this
Section 3 shall constitute an Event of Default for all purposes of the Credit
Agreement.
Section 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Lenders and the Administrative Agent that (a) this Amendment No.
1 (and the Credit Agreement, as amended hereby) constitutes a legal, valid and
binding obligation of each Obligor, enforceable against such Obligor in
accordance with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and (ii) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and (b) the
execution, delivery and performance of this Amendment No. 1 (and of the Credit
Agreement, as amended hereby) by each Obligor will not violate or result in a
default under any indenture, agreement or other instrument binding upon the
Borrower or any of its Subsidiaries or assets, or give rise to a right
thereunder to require any payment to be made by any such Person. It shall be an
Event of Default for all purposes of the Credit Agreement, as amended hereby, if
any representation or warranty made by the Borrower in this Section 4 shall
prove to have been false or misleading as of the time made in any material
respect.
Section 5. MISCELLANEOUS. Except as herein provided, the Credit Agreement
shall remain unchanged and in full force and effect. This Amendment No. 1 may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same amendatory instrument and any of the parties hereto
may execute this Amendment No. 1 by signing any such counterpart. This Amendment
No. 1 shall be governed by, and construed in accordance with, the law of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed and delivered as of the day and year first above written.
CANANDAIGUA BRANDS, INC.
By /s/ Thomas S. Summer
---------------------------------
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
SUBSIDIARY GUARANTORS
ALLBERRY, INC.
BATAVIA WINE CELLARS, INC.
CANANDAIGUA EUROPE LIMITED
CANANDAIGUA WINE COMPANY, INC.
CLOUD PEAK CORPORATION
FRANCISCAN VINEYARDS, INC.
M.J. LEWIS CORP.
MT. VEEDER CORPORATION
POLYPHENOLICS, INC.
ROBERTS TRADING CORP.
SCV-EPI VINEYARDS, INC.
SIMI WINERY, INC.
By /s/ Thomas S. Summer
--------------------------
Title: Treasurer
BARTON INCORPORATED
BARTON BRANDS, LTD.
BARTON BEERS, LTD.
BARTON BRANDS OF CALIFORNIA, INC.
BARTON BRANDS OF GEORGIA, INC.
BARTON CANADA, LTD.
BARTON DISTILLERS IMPORT CORP.
BARTON FINANCIAL CORPORATION
MONARCH IMPORT COMPANY
STEVENS POINT BEVERAGE CO.
THE VIKING DISTILLERY, INC.
By /s/ Thomas S. Summer
--------------------------
Title: Vice President
CANANDAIGUA LIMITED
By /s/ Thomas S. Summer
--------------------------
Title: Finance Director
CANANDAIGUA B.V.
By /s/ Thomas S. Summer
--------------------------
Title: Authorized Attorney
<PAGE>
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ Bruce Borden
--------------------------
Title: Vice President
EXHIBIT 4.20
------------
SUPPLEMENTAL INDENTURE NO. 3 (the "Supplement"), dated as of August 6,
1999, is entered into by and among CANANDAIGUA BRANDS, INC. (formerly known as
Canandaigua Wine Company, Inc.), a Delaware corporation (the "Company"), and
Canandaigua B.V., a private company with limited liability incorporated under
the laws of the Netherlands, Barton Canada, Ltd., an Illinois corporation, Simi
Winery, Inc., a California corporation, Franciscan Vineyards, Inc., a Delaware
corporation, Allberry, Inc., a California corporation, M.J. Lewis Corp., a
California corporation, Cloud Peak Corporation, a California corporation, Mt.
Veeder Corporation, a California corporation and SCV-EPI Vineyards, Inc., a New
York corporation, each being, directly or indirectly, a wholly-owned subsidiary
of the Company (individually a "New Guarantor" and collectively the "New
Guarantors"), and HARRIS TRUST AND SAVINGS BANK , as Trustee (the "Trustee").
RECITALS OF THE COMPANY AND THE NEW GUARANTORS
WHEREAS, the Company, the Guarantors and the Trustee have executed and
delivered an Indenture, dated as of February 25, 1999 (the "Base Indenture"), a
Supplemental Indenture No. 1, dated as of February 25, 1999 with respect to the
issuance by the Company of $200,000,000 aggregate principal amount of the
Company's 8 1/2% Senior Subordinated Notes due 2009 (the "First Supplemental
Indenture"), and a Supplemental Indenture No. 2 dated as of August 4, 1999 with
respect to the issuance by the Company of up to $400,000,000 aggregate principal
amount of the Company's 8 5/8% Senior Notes due 2006 (the "Second Supplemental
Indenture" and collectively with the Base Indenture and the First Supplemental
Indenture, the "Indentures") pursuant to which the Guarantors have agreed to
guarantee, jointly and severally, the full and punctual payment and performance
when due of all Indenture Obligations; and
WHEREAS, the New Guarantors have become Subsidiaries and pursuant to the
Indentures are obligated to enter into this Supplement thereby guaranteeing the
punctual payment and performance when due of all Indenture Obligations; and
WHEREAS, pursuant to the Indentures, the Company, the New Guarantors and
the Trustee may enter into this Supplement without the consent of any Holder;
and
WHEREAS, all conditions and requirements necessary to make the Supplement
valid and binding upon the Company and the New Guarantors, and enforceable
against the Company and the New Guarantors in accordance with its terms, have
been performed and fulfilled;
NOW, THEREFORE, in consideration of the above premises, each of the parties
hereto agrees, for the benefit of the others and for the equal and proportionate
benefit of the Holders of the Securities, as follows:
ARTICLE ONE
THE NEW GUARANTEE
Section 101. For value received, the New Guarantors hereby absolutely,
unconditionally and irrevocably guarantee (the "New Guarantee"), jointly and
severally among themselves and
<PAGE>
the Guarantors, to the Trustee and the Holders, as if each New Guarantor was the
principal debtor, the punctual payment and performance when due of all Indenture
Obligations (which for purposes of the New Guarantee shall also be deemed to
include all commissions, fees, charges, costs and other expenses (including
reasonable legal fees and disbursements of one counsel) arising out of or
incurred by the Trustee or the Holders in connection with the enforcement of
this New Guarantee). The agreements made and obligations assumed hereunder by
the New Guarantors shall constitute and shall be deemed to constitute a
Guarantee under the Indentures and for all purposes of the Indentures as if each
of the New Guarantors was originally named therein as the Guarantor.
Section 102. The New Guarantee shall be released upon the occurrence of the
events as provided in the Indentures.
Section 103. The New Guarantors hereby waive, and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Subsidiary as a result of any payment by such Subsidiary under its
Guarantee under the Indentures.
ARTICLE TWO
MISCELLANEOUS
Section 201. Except as otherwise expressly provided or unless the context
otherwise requires, all terms used herein which are defined in the Indentures
shall have the meanings assigned to them in the Indentures. Except as
supplemented hereby, the Indentures (including the Guarantees incorporated
therein) and the notes issued pursuant thereto are in all respects ratified and
confirmed and all the terms and provisions thereof shall remain in full force
and effect.
Section 202. The recitals contained herein shall be taken as the statements
of the Company and the New Guarantors, and the Trustee assumes no responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Supplement.
Section 203. This Supplement shall be governed by and construed in
accordance with the laws of the jurisdiction which governs the Indentures and
their construction.
Section 2.04. This Supplement may be executed in any number of counterparts
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be
duly executed and their respective seals to be affixed hereunto and duly
attested all as of the day and year first above written.
CANANDAIGUA BRANDS, INC.
[Corporate Seal] By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Senior Vice President and
Chief Financial Officer
Attest: /s/David S. Sorce
-----------------
Title: Secretary
CANANDAIGUA B.V.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Authorized Representative
BARTON CANADA, LTD.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President
SIMI WINERY, INC.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: President and Treasurer
FRANCISCAN VINEYARDS, INC.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
<PAGE>
ALLBERRY, INC.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
M.J. LEWIS CORP.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
CLOUD PEAK CORPORATION
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
MT. VEEDER CORPORATION
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
SCV-EPI VINEYARDS, INC.
By: /s/Thomas S. Summer
-----------------------------------
Name: Thomas S. Summer
Title: Vice President and Treasurer
HARRIS TRUST AND SAVINGS BANK
[Corporate Seal] By: /s/J. Bartolini
-----------------------------------
Name: J. Bartolini
Title: Vice President
Attest: /s/Ray Nowakowski
-----------------
Title: Asst. Secretary
EXHIBIT 10
----------
AMENDMENT NUMBER TWO TO THE
CANANDAIGUA BRANDS, INC.
LONG-TERM STOCK INCENTIVE PLAN
This Amendment Number Two to the Canandaigua Brands, Inc. Long-Term Stock
Incentive Plan, as amended (the "Plan"), was approved pursuant to Section 19 of
the Plan by the Board of Directors of Canandaigua Brands, Inc. (the "Company"),
acting in its capacity as the Committee under the Plan, and by the stockholders
of the Company. Capitalized terms used herein which are not otherwise defined
shall have the meanings ascribed to them in the Plan and Annex A thereto.
The Plan is hereby amended to increase the number of shares of the
Company's Common Stock with respect to which Awards may be made under the Plan
from four million shares to seven million shares by amending the first sentence
of the first paragraph of Section 4 of the Plan to read in its entirety as
follows:
The total number of shares of the Company's Common Stock available for
Awards under the Plan in the aggregate shall not exceed seven million
shares.
In witness whereof, Canandaigua Brands, Inc. has caused this instrument to
be executed as of July 20, 1999.
--
CANANDAIGUA BRANDS, INC.
By: /s/ Richard Sands
-----------------
Richard Sands, President
EXHIBIT 11
----------
CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except per share data)
For the Six Months Ended August 31,
---------------------------------------
1999 1998
----------------- -----------------
Basic Diluted Basic Diluted
------- ------- ------- -------
Income applicable to common shares $31,947 $31,947 $29,830 $29,830
Adjustments - - - -
------- ------- ------- -------
Income applicable to common shares $31,947 $31,947 $29,830 $29,830
------- ------- ------- -------
Shares:
Weighted average common shares
outstanding 17,994 17,994 18,669 18,669
Adjustments:
Stock options - 465 - 499
------- ------- ------- -------
Adjusted weighted average common
shares outstanding 17,994 18,459 18,669 19,168
------- ------- ------- -------
Earnings per common share $ 1.78 $ 1.73 $ 1.60 $ 1.56
======= ======= ======= =======
For the Three Months Ended August 31,
---------------------------------------
1999 1998
----------------- -----------------
Basic Diluted Basic Diluted
------- ------- ------- -------
Income applicable to common shares $21,101 $21,101 $16,731 $16,731
Adjustments - - - -
------- ------- ------- -------
Income applicable to common shares $21,101 $21,101 $16,731 $16,731
------- ------- ------- -------
Shares:
Weighted average common shares
outstanding 18,010 18,010 18,589 18,589
Adjustments:
Stock options - 489 - 462
------- ------- ------- -------
Adjusted weighted average common
shares outstanding 18,010 18,499 18,589 19,051
------- ------- ------- -------
Earnings per common share $ 1.17 $ 1.14 $ 0.90 $ 0.88
======= ======= ======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's August 31, 1999 Form 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000016918
<NAME> CANANDAIGUA BRANDS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-END> AUG-31-1999
<CASH> 4,340
<SECURITIES> 0
<RECEIVABLES> 344,652
<ALLOWANCES> 0
<INVENTORY> 602,257
<CURRENT-ASSETS> 1,025,455
<PP&E> 700,573
<DEPRECIATION> 147,131
<TOTAL-ASSETS> 2,380,288
<CURRENT-LIABILITIES> 499,031
<BONDS> 1,274,295
0
0
<COMMON> 218
<OTHER-SE> 468,731
<TOTAL-LIABILITY-AND-EQUITY> 2,380,288
<SALES> 1,151,749
<TOTAL-REVENUES> 1,151,749
<CGS> 806,499
<TOTAL-COSTS> 806,499
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,675
<INCOME-PRETAX> 53,244
<INCOME-TAX> 21,297
<INCOME-CONTINUING> 31,947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,947
<EPS-BASIC> 1.78
<EPS-DILUTED> 1.73
</TABLE>
